The IRS has announced that the standard mileage rate for business use is increasing to 51¢ per mile for business travel after 2010. That’s a whole penny more than the rate for 2010! The mileage rate for moving expenses or medical care is 19¢ per mile. That’s a whole 2.5¢ increase from the 2010 rate. The mileage rate for charitable miles stayed at 14¢ per mile.
The standard mileage deduction replaces separate deductions for lease payments (or depreciation if the car is purchased), maintenance, repairs, tires, gas, oil, insurance and license and registration fees.
The standard mileage rate may not be used for a purchased auto if:
• it was previously depreciated using a method other than straight-line for its estimated useful life;
• a Code Sec. 179 expensing deduction was claimed for the auto;
• the taxpayer has claimed the additional first-year depreciation allowance; or
• the taxpayer depreciated it using MACRS under Code Sec. 168.
For those taxpayers eligible to use it, the standard mileage rate offers the following advantages:
• Mileage rate users need not keep a record of actual expenses, or retain receipts where required. A record of the time, place, business purpose and number of miles traveled suffices. We usually recommend you keep a pocket calendar in your car so you can mark this information down.
• The mileage rate method may yield bigger deductions than the actual expense method for a thrifty, high-mileage model but in some cases is can yield a smaller deduction. A calculation is necessary every year to see if the standard mileage rate or actual expenses is the more advantageous method to use.
Employers that require employees to supply their own autos may reimburse them at a rate that doesn’t exceed 51¢ per mile.