One of the most common tax deductions is deducting miles driven for business purposes. Even if you can’t deduct your mileage because your employer reimburses you, chances are that reimbursement rate is set to the IRS standard mileage rate.
Of course, you may also deduct your actual expenses for operating a motor vehicle rather than taking the standard rate per mile. However, this requires that you keep all receipts for any expenses and properly account for a variety of complicated factors. Most small businesses and self-employed individuals use the standard rates which is simpler, and in most cases, just a generous as deducting actual expenses.
Standard IRS Mileage Rate Chart
There are actually three different types of IRS mileage rates for 2013.
For miles driven for business, the IRS rate per mile is 56.5 cents for each mile driven.
For miles driven for medical purposes, or for taxpayers deducting moving expenses, the standard IRS rate per mile is 24 cent for each mile driven.
For miles driven for charitable purposes, the standard deductible mileage rate is 14 cents per mile for each mile driven.
The standard deduction mileage rate is adjusted every year based upon a study of actual costs for operating an automobile. The vast majority of the change in the rate each year comes from the price of gasoline since the cost of things like tires and maintenance tends not to vary significantly each year.
A single rate for deducting miles set by the IRS is calculated for the entire United States. Therefore, taxpayers living in areas with lower gasoline costs are much more likely to come out ahead using the standard mileage deductible rate than those are who live in areas with higher gasoline prices.
Although the IRS has adjusted the mileage deduction rate in the past during the year as a result of volatile gasoline prices, the 2013 IRS mileage rate was not adjusted in the middle of the year. Taxpayers can therefore use the single amount for each category for all miles driven.
As is always the case, in order to deduct mileage, the miles driven must be for a qualified purpose, and contemporaneous records must be kept by the taxpayer. Miles driven to and from work where one is employed are considering commuting miles, and mileage commuting back and forth to work is not tax deductible. Contractors who are not W2 employees can typically deduct their mileage, for commuting however. Furthermore, employees who are reimbursed for miles driven by their employer may not also deduct the mileage on their taxes.
For self-employed individuals, mileage is deducted on the IRS Form 1040 Schedule C. While the standard per mile rate does cover maintenance and wear and tear on the vehicle, it does not include expenses for parking, tolls, or other vehicle fees. If these charges are incurred while operating the vehicle for business purposes, they can be additionally deducted elsewhere on Schedule C as business expenses.
This article is for general information purposes only and is not individual tax advice. Consult a tax professional for specific tax advice applicable to your situation.