The IRS mileage rate as of January 2009 can be used to determine how much you should be allowed to claim as a deductible expense for operating a car or vehicle for business use, for medical use or for moving purposes.
Effectively this means that the IRS mileage rate for driving a vehicle for business purposes is now calculated at 55 cents per mile driven.
On the other hand, this amount drops to twenty-four cents/mile driven for any moving and medical purposes. You are allowed to obtain the deduction of 14 cents/mile driven in the service of any charity.
With the cost of fuel slowly creeping up again, making the most of claiming for deductible expenses for vehicle use means the IRS mileage rate could prove very convenient for many people.
When you’re calculating your own deductible expenses and you’re factoring in the IRS mileage rate throughout the tax year, you should keep in mind that there are two ways to calculate deductible vehicle costs.
The primary is the IRS mileage rate which by far the easiest technique. The figure of 55 cents/mile driven for business use was calculated by basing estimates of the fixed plus variable costs of running a car.
For the vast majority of people using the IRS mileage rate can help to reduce your tax liability and increase the amount you’re potentially likely to claim in deductions.
Somehow another choice for lots of business people is to reckon the real expenses of operating the car throut the year. This means keeping an accurate log-book to record all miles driven. It also means keeping your receips for fuel and servicing. Along with any routine maintenance or repairs that may arise thru the year, so that insurance costs and registration should be included.
Many people prefer to use the calculation for the IRS mileage rate since it can be burdensome on the paperwork side by recording so many costs throughout the year. However if you’re willing to put up with a little inconvenience of keeping receipts and calculating the actual costs, you may find that your deductions outweigh the amount handed automatically by the IRS mileage rate.
The best way to determine whether you should use the IRS mileage rate or the actual cost basis is to either speak to your accountant or try to keep a running cost of your total expenses for a full three months and then multiply that figure by 4 to give you an estimate of how much you’ll be able to claim in an entire year. If you’re unsure of which way to proceed, call the IRS and they’ll be able to assist you with any questions.