IRS Mileage Rate Explained
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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.
Effectively this means that the IRS mileage rate for driving a vehicle for business purposes is now calculated at 55 cents per mile driven.
Somehow, this amount drops to 24 cents/mile driven for any medical purposes. You are allowed to obtain the deduction of 14 cents/mile driven in the service of any charity.
With the cost of fuel slowly creeping up again, making the most of claiming for deductible expenses for vehicle use means the IRS mileage rate could prove very convenient for many people.
You should keep in mind that there are 2 ways to count deductible car costs when you’re counting your very own deductible expenses and factoring in the IRS mileage rate throughout the tax year.
The primary is the IRS mileage rate which by far the easiest process. 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 a correct log-book to note all miles driven. That is also means keeping your receipts for maintenance cost and fuel as well as servicing. Registration and insurance costs should also be included, along with any other routine maintenance or repairs that may arise through the year.
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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