Generally, the IRS sets the mileage rate for taxes once per year in December. Gas prices go up and and down through the year, but the mileage deduction rate is not adjusted monthly or quarterly.
2011 Mileage Rate Update
However, the IRS increased the optional standard mileage rates for the last six months of 2011 citing, “increased gas prices … having a major impact on individual Americans.” The 2011 IRS mileage rate increased to 55.5 cents per mile from the original IRS 2011 mileage deduction rate of 51 cents, which still applies to the first six months of 2011.
In other words, when you figure out your income tax deductions for your 2011 taxes in 2012, you’ll have to use two different mileage rates to get the correct deduction for miles driven for business purposes. As always, the IRS requires contemporaneous driving records in order to deduct the mileage on your taxes. Using those records, taxpayers will multiply each deductible mile by 51 cents for trips between January 1st and June 30th and 55.5 cents per mile for trips between July 1st and December 31st.
Other IRS Mileage Rates for 2011
The standard IRS mileage rate is the one for business purposes. However, there are two other cases where you can deduct mileage.
Certain miles driven for medical purposes or for moving purposes may be deducted. The rate for this deduction was 19 cents per mile at the beginning of 2011. The mileage rate increases to 23.5 cents per mile for the second half of 2011.
Miles driven for charitable purposes can also be deducted in some cases. Mileage for charity is deducted at the rate of 14 cents per mile. The charitable mileage rate was not increased by the IRS.
Options Business Standard Mileage Rate
Income tax deductions for mileage may be computed in two ways. The most commonly used method uses the standard mileage rate set by the IRS. The deduction is computed by multiplying the standard rate times the number of miles driven.
However, taxpayers may also deduct the actual costs of operating a vehicle. Doing so, requires drivers to keep all receipts for fuel and maintenance and then to computer the vehicle’s depreciation. Most people forgo this extra effort and just use the mileage rate.
Businesses Reimbursement Rate for Mileage
Most American companies use the IRS mileage rate for reimbursing employees for miles driven on behalf of the company. There are two main reasons for this. First, companies deduct the money they reimburse to employees as a business expense. The IRS can’t complain the company is using too high or too low of a rate if it is using the same one as the IRS. Second, companies are shielded from employee complaints about the rate being too high or too low by saying that they are not responsible for the rate and that the IRS sets it.
However, there is no automatic requirement that companies raise their 2011 mileage reimbursement rates just because the IRS made a mid-year increase in the rate.
Check with your company to verify what your reimbursement mileage rate should be for the rest of 2011.
Tags: IRS, mileage deduction, mileage rate, Taxes
There is a battle brewing between Grocery Store chains that will benefit savvy customers. Recently, King Soopers made news in the Denver, Colorado area with its rewards program offering up to $1 off each gallon of gas purchased at King Soopers’ gas stations or affiliated Loaf n Jug gas stations. Basically, each dollar spent when [...]
Continue reading about Save $1 Gallon on Gasoline with Grocery Cards
PayPal is a popular way to pay people online and also a useful resource for freelancers to get paid electronically. Funds can be transferred electronically from your PayPal account to your linked bank account at anytime. However, there can be a significant delay between when you initiate a PayPal transfer and when it shows up [...]
Sales of new houses rose 7.3 percent, to 323,000 annual pace, the highest level in 2011. Of course, this comes on the heels of a record low just two months ago. New home sales statistics are quoted on an annual basis. In other words, if April’s new home sales numbers were what the new home [...]
For the most part, I typically assume that people who have misinformation came by it honestly. Usually, they didn’t quite understand fully what they read or were told. After all, one of the trickiest things about managing money and personal finance is that there are so many exceptions and nuances. In a lot of cases, [...]
Continue reading about Not Cashing Savings Bonds to Avoid Taxes
UTMA and UGMA are very similar. Both are uniform code proposals adopted by the individual states. Like other uniform codes (the uniform building code is a common one, for example) these work by proposing a common framework for states to use in order to prevent a hard to use patchwork of laws in each state. [...]
Continue reading about What Is The Difference Between UTMA and UGMA?
When it comes to rollovers or transfers between 401k accounts and IRA accounts, one word makes a lot of difference. A 401k rollover requires that 20 percent of the amount being rolled over be withheld for taxes, even though the account owner still has to deposit 100 percent of the amount within 60 days to [...]
Continue reading about Difference Between a Rollover and a Transfer