IRS Increases Standard Mileage Rates for 2024

We review how to anticipate 2024 income with deductions for business or medical use of a car.

The IRS recently issued Notice 24-08, which contains the 2024 standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical, or moving purposes.

With the recent notice, the 2024 business standard mileage rate is increasing to 67 cents, up 1.5 cents from 2023. In addition to the rate per mile driven for business use, the IRS also announced the standard mileage rate for 2024 will be:

• 21 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, a decrease of 1 cent from 2023; and
• 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2023.

These rates apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.

It’s important to note that under the Tax Cuts and Jobs Act, taxpayers can’t claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also can’t claim a deduction for moving expenses, unless they’re members of the Armed Forces on active duty moving under orders to a permanent change of station.

For HUD-assisted housing purposes, these mileage rates are considered when calculating net income from some businesses such as ride-hailing and app-based delivery services. The rates also are used when calculating medical expense deductions for mileage to and from medical treatment or appointments. We’ll go over how to anticipate business income for 2024 with deductions for business use of a vehicle and the basics of the medical expense deduction.

Business Driving Expense Deductions

Some of your applicants or residents may spend time behind the wheel of their car earning money with ride-hailing or delivery apps in what’s referred to as gig employment. Most “gig work” comes from the following app or companies:

• Uber—A modern-day taxi or ride-hailing app;
• Lyft—Another ridesharing app like Uber;
• Instacart—An online service that shops for groceries and delivers them to clients;
• Amazon Flex—A delivery service for Amazon parcels;
• Postmates—A delivery service app;
• WAG—A service that books appointments for dog walkers;
• TaskRabbit—A service that offers a variety of gig work such as shopping and home repairs;
• Dolly—A service that provides on-demand moving help;
• Uber Eats—A service that picks up and delivers food;
• Grubhub—Another food delivery app; and
• DoorDash—Another food delivery app.

The individuals paid from these services are self-employed and their income can be sporadic and dependent on the rates prescribed by the app. For these individuals, transportation costs are deductible as business operating expenses. These residents have two options for deducting vehicle expenses: They can use the standard mileage rate, or they can deduct their actual expenses for gas, depreciation, and other driving costs. Most people use the standard mileage rate because it is simpler and requires less recordkeeping. By using this option, one needs to keep track of only how many business miles were driven and not the actual expenses of their car, such as the amount paid for gas.

To figure out the deduction, the resident multiplies business miles driven by the applicable standard mileage rate. Then, the deduction is applied to the driver’s gross income. Most gig economy companies provide income statements showing monthly, quarterly, and annual earnings.

Example: An applicant delivers food with an app-based delivery service. She has been delivering food with the app-based service for four months. Her income certification will be effective March 1, and she provides printouts from the service of her gross income with taxable business deductions. Her income, not including any mileage, is $4,200.23. The printouts also show that she has driven 1,321 miles while working for the service. To calculate her annual income projection, you would perform the following steps:

• Step 1: Calculate mileage so far. [1,321 miles x .67 = $885.07]
• Step 2: Calculate the four-month net income. [$4,200.23 - $885.07 mileage deduction = $3,315.16]
• Step 3: Annualize net income. [$3,315.16 x 3 = $9,945.48]

If the resident chooses the standard mileage rate, she cannot deduct actual car operating expenses such as maintenance and repairs, gasoline and its taxes, oil, insurance, and vehicle registration fees. All of these items are factored into the rate set by the IRS. And she can’t deduct the cost of the car through depreciation, because the car’s depreciation is also factored into the standard mileage rate as are lease payments for a leased car.

The resident must use the standard mileage rate in the first year that she uses a car for business or she is forever prevented from using that method for that car. If she uses the standard mileage rate the first year, she can switch to the actual expense method in a later year, and then switch back and forth between the two methods after that. However, this rule doesn’t apply to leased cars. If your resident leases her car, she must use the standard mileage rate for the entire lease period if she used this option in the first year.

Medical Expense Deductions

If any of your households are classified as elderly or disabled, HUD permits a medical expense deduction to be used to calculate their adjusted annual income. You can include mileage to and from medical appointments and to and from regular medical treatments as part of the medical expense deduction. This includes medical treatment for approved assistance animals. Remember, the mileage rate is currently 21 cents per mile based on the IRS notice.

The medical expense deduction is permitted only for households in which the head, spouse, or co-head is at least 62 years old or is a person with disabilities [HUD Handbook 4350.3, par. 5-10(D)(1)]. When calculating the medical expense deduction, the actual cost of traveling to and from treatment is used. This can be bus or taxi fare or, if driving a car, a mileage rate based on IRS rules. So, when calculating the medical expense deduction for mileage to and from medical treatments or appointments, be sure to use the new 2024 mileage rates.

Include all family members. If this classification applies to your household, you must include out-of-pocket medical expenses for all household members except live-in aides, even if the other household members are not elderly or disabled [HUD Handbook 4350.3, par. 5-10(D)(2)]. In other words, although medical expenses are permitted only for elderly or disabled households, once a household qualifies as an elderly or disabled household, the medical expenses of all household members are considered.

For example, if a household includes a 70-year-old grandfather (head), a 37-year-old daughter, and a 4-year-old grandson, the medical expenses of all three family members would be considered when calculating the medical expense deduction.

Include all unreimbursed expenses. Medical expenses include all expenses the family expects to incur during the 12 months following certification/recertification that aren’t reimbursed by an outside source, such as insurance [HUD Handbook 4350.3, par. 5-10(D)(3)].

Also, an owner may use the ongoing expenses the family paid in the 12 months preceding the certification/recertification to estimate anticipated medical expenses [HUD Handbook, par. 5-10(D)(2-4)]. Examples of anticipated medical expenses include prescription drugs, eyeglasses, unpaid doctor and hospital bills that include a payment plan, insurance premiums, Medicare Part D premiums, hearing aids, dental care, transportation/mileage to healthcare appointments, etc.

Deduct excess of certain percentage. Previously, if you were eligible and spent more than 3 percent of your gross income on certain medical expenses, you received an income deduction [HUD Handbook 4350.3, par. 5-10(D)(5)]. However, the new rules for deductions under the Housing Opportunity Through Modernization Act (HOTMA) change this figure to 10 percent, meaning that fewer medical expenses will be deducted and a tenant’s portion of the rent could increase. For public housing or Section 8 owners, your local PHA will choose a date to start implementing HOTMA rules.

To help residents, this change will be made over two years (phased-in relief). If a household previously had a deduction for medical expenses over 3 percent of gross income, the adjusted income and rent could increase under the new rules. To help, this increase will happen over two years. For the first year, the PHA or owner will deduct eligible expenses over 5 percent of household income. For the second year, the PHA will deduct eligible expenses over 7.5 percent of household income. And, in the third year, the PHA or owner will deduct eligible expenses over 10 percent of household income.

Also, a new general hardship deduction allows households who cannot pay rent due to a hardship to deduct more medical expenses for a time. If a household is struggling to pay rent and doesn’t qualify for an interim income review, the household can get a deduction for all eligible expenses over 5 percent of yearly income. The exemption ends when the hardship ends or after 90 days, whichever comes first. And this deduction is available at any time.