What are IRS Mileage Allowances?

by Catherine Rein
(last updated May 28, 2009)

Whether you own your own business and need to drive to visit customers or use your personal car part of the time for business use, the IRS allows the deduction from your taxes in the form of a mileage allowance. Keep in mind that in order to use this deduction you'll have to itemize and you're only able to deduct the cost of the car's business use.

The IRS mileage allowance is only for cars that are owned or leased by the taxpayer. Also, you can't use it if you operate five or more vehicles. This allowance is not applicable to fleet operations.

The IRS announces the mileage allowance rate at the beginning of the year. These rates change over time depending on the cost of gasoline and other economic data. The deduction made in the income tax return on the basis of mileage is called an IRS Mileage Allowance.

Whether you use your car for business, medical purposes or in the service of a charitable organization, it is important to track carefully your automobile expenses to maximum your tax credit. Consider the following IRS mileage allowances when preparing your tax documents. Be sure to follow the advice of a tax professional before making any decisions:

  • Beginning January 1, 2009. The standard rates for the use of a car (also vans, pickups or panel trucks) will be $0.55 per mile for business miles, $0.24 per mile for medical or moving purposes and $0.14 per mile in service of charitable organizations.
  • Actual Expense Method. You must determine what it actually costs to operate the car (for the portion attributable to business use). This includes gas, oil, repairs, tires, insurance, registration fees, licenses and depreciation. You should carefully track expenses for this method and remember to keep receipts.
  • Other Car Expenses. These include parking fees and tolls attributable to business use. These are separately deductible, whether you use the standard mileage rate or actual expenses.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method or after claiming a Section 179 deduction for that vehicle. In addition, you cannot use the business standard mileage rate for any vehicle for hire, such as a taxi, or for more than four vehicles used simultaneously.

Author Bio

Catherine Rein

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