Mileage Deduction

If you own a business that requires you to use cars or other vehicles frequently, you will be significantly affected by rising gas prices. Fortunately, the IRS offers mileage deduction for people who need to operate vehicles for business purposes, and such deduction can help you save a considerable amount of money every year. Depending on circumstances, the mileage deduction rate can change from time to time, and you need to know the current rate to find out exactly how much tax deduction you are entitled to.

On the 1st of January, 2011, the business mileage deduction rate was raised to 51 cents per mile, which was a one cent increase from the previous year. In response to the increase in gas prices in the early part of the year, the IRS announced a midyear mileage deduction increase. As of the 1st of July, 2011, you can get a mileage deduction of 55.5 cents per mile. This increase in business mileage deduction will be especially beneficial to you if you are using economical vehicles. The mileage deduction that you will be receiving may be more favorable compared to the actual costs of operating your vehicles. The good thing is that the IRS offers the same mileage deduction rate for both economical and uneconomical cars.

To find out the amount of mileage deduction that you can claim, all you have to do is multiply the mileage deduction rate offered by the IRS with the total number of miles that your vehicles have traveled. Alternatively, you can deduct the actual costs that are incurred for operating your vehicles for business purposes, but this method may require more record-keeping. To make sure that you will get the most accurate calculations, it is essential that you get a log book to keep track of odometer readings on your vehicles. You can get your employees to report odometer readings on the vehicles they drive every day.

The mileage deduction rate of 55.5 cents per mile only applies to the use of vehicles for business purposes. There are also mileage deductions for other kinds of vehicle usage, including traveling for medical and charitable purposes, as well as moving. If you are using your vehicle when you are moving or you need to drive to a medical facility, you can get a mileage deduction of 23.5 cents per mile, which is 4.5 cents more than the rate that was offered in January, 2011. The deduction for traveling to a medical facility may be negligible for most people, but it provides substantial savings for those who need to seek regular medical treatment such as dialysis and chemotherapy. If you are driving for charitable purposes, you can get a mileage deduction of 14 cents per mile, which has been the same since 2009.

It took a long time for these generous increases in mileage deduction to be implemented by the IRS, but many vehicle owners are glad that they are finally here. With these increases, all those who use vehicles for business, medical, relocation, and charitable purposes can reduce their transportation expenses considerably.