IRS Mileage Explained

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.

Efficiently it means that the IRS rate for business use is now calculated at 55 cents/mile driven.

However this figure dros to twenty-four cents/mile driven for any moving purposes. You can request deduction of 14 cents/mile driven in the service of charitable organizations.

Lots of people feel comfortable making the most of claiming for deductible expenses for vehicle use since the cost of fuel is creeping up again.

You should keep in mind that there are 2 ways to count deductible car costs when you’re counting your very own deductible expenses and factoring in the IRS mileage rate throughout the tax year.

The primary is the IRS mileage rate which by far the easiest process. The figure of 55 cents per mile driven for business use was determined by basing estimates of the fixed and 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.

However the alternative option for some business people is to calculate the actual expenses of operating a vehicle throughout the year. This means keeping an accurate log-book to record all miles driven. It also means keeping your maintenance costs or fuel and servicing. Registration and insurance costs should also be included, along with any other routine maintenance or repairs that may arise through the year.

It can be burdensome on the paperwork side when you noting so many costs throughout the year, so that many people like to simply use the calculation for the IRS mileage rate. You may find that your deductions outweight the amount handed automatically by the IRS mileage rate if you are willing to put up a little discomfort of keeping receipts that real costs.

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.