IRS Mileage Rate Explained

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Saturday, June 20th, 2009 Subscribe To Our Feed

The IRS mileage rate as of January 2009 can be used to determine how much you should be allowed to claim as a deductible expense for operating a car or vehicle for business use, for medical use or for moving purposes.

Efficiently it means that the IRS rate for business use is now calculated at 55 cents/mile driven.

However this figure drops to 24 cents per mile driven for any medical or moving purposes. You’re also allowed to claim the deduction of 14 cents per mile driven in the service of any charitable organizations.

Since the rate of fuel creeping up again, claiming for deductible expenses for car use means the IRS mileage rate could prove comfortable for lots of people.

When you’re calculating your own deductible expenses and you’re factoring in the IRS mileage rate throughout the tax year, you should keep in mind that there are two ways to calculate deductible vehicle costs.

The first is the IRS mileage rate where by far the simplest way. The sum of 55 cents per mile driven for business purpose was determined by basing estimates of the rate of running a car.

For the vast majority of people using the IRS mileage rate can help to reduce your tax liability and increase the amount you’re potentially likely to claim in deductions.

However the alternative option for some business people is to calculate the actual expenses of operating a vehicle throughout the year. This means keeping an accurate log-book to record all miles driven. It also means keeping all your receipts for fuel or servicing and maintenance costs. Along with any routine maintenance or repairs that may arise thru the year, so that insurance costs and registration should be included.

Many people prefer to use the calculation for the IRS mileage rate since it can be burdensome on the paperwork side by recording so many costs throughout the year. You may find that your deductions outweight the amount handed automatically by the IRS mileage rate if you are willing to put up a little discomfort of keeping receipts that real costs.

The best way to determine whether you should use the IRS mileage rate or the actual cost basis is to either speak to your accountant or try to keep a running cost of your total expenses for a full three months and then multiply that figure by 4 to give you an estimate of how much you’ll be able to claim in an entire year. If you’re unsure of which way to proceed, call the IRS and they’ll be able to assist you with any questions.

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