Standard Business Mileage Deduction

Dear M & M:

What is the standard mileage deduction for use of your personal vehicle for business?

–Beverly

Dear Beverly:

Properly documenting and taking allowable deductions for business expenses is an important part of running any business. As always before any business takes advantage of allowable business expenses it is important you know and understand what you are doing. Please check with your CPA, bookkeeper or the IRS so you fully understand the rules. If your business can use the standard mileage rate and trip qualifies for business purposes.

A trip from Sierra Vista to Douglas that uses 100 miles using 2015 standard rate of .575 a business could reimburse $57.50 for personal use of your vehicle. Here is what the IRS says about it,  “The Internal Revenue Service 2015 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes:

Beginning on Jan. 1, 2015, the standard mileage rates for the use of a car, van, pickup or panel truck will be for 2015: 57.5 cents per mile for business miles driven, up from 56 cents in 2014, 23 cents per mile driven for medical or moving purposes, down half a cent from 2014, 14 cents per mile driven in service of charitable organizations. The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil.

The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law. Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after claiming accelerated depreciation, including the Section 179 expense deduction, on that vehicle. Likewise, the standard rate is not available to fleet owners (more than four vehicles used simultaneously).

Details on these and other special rules are in Revenue Procedure 2010-51 and the instructions to Form 1040 and various online IRS publications including Publication 17, Your Federal Income Tax. Besides the standard mileage rates, Notice 2014-79, posted on IRS.gov, also includes the basis reduction amounts for those choosing the business standard mileage rate, as well as the maximum standard automobile cost that may be used in computing an allowance under a fixed and variable rate plan” – IRS.

If using the standard mileage deduction rates, create a spreadsheet list date, reason for trip, beginning odometer reading, ending odometer reading, rate, miles driven, total to reimburse. Remember only count miles driven for business purpose. Remember you can generally figure the amount of your deductible car expense by using one of two methods: the standard mileage rate method as described above or the actual expense method.

According to the IRS, other car expenses for parking fees and tolls attributable to business use are separately deductible, whether you use the standard mileage rate or actual expenses. As always, consult accountant, CPA, enrolled agent or bookkeeper knowledgeable in this area and start taking advantage of allowable expenses occurred in running your business.

Check out whether the standard or actual expense works out best for you. Bottom line; make sure you are taking advantage of allowable expenses in your business properly.

-M&M

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