Jan 11
26
Standard Mileage Rates
- Business travel rate for owned or leased autos (including vans, pickups or panel trucks): 51 cents/mile
- Medical care or in connection with a move that qualifies for the moving expense deduction: 19 cents/mile
- Charitable mileage: 14 cents/mile
Simplified deduction method. The mileage allowance deduction replaces separate deductions for lease payments (or depreciation if the car is purchased), maintenance, repairs, tires, gas, oil, insurance and license and registration fees. The taxpayer may, however, still claim separate deductions for parking fees and tolls connected to business driving.
The standard mileage rate may not be used for a purchased auto if:
- it was previously depreciated using a method other than straight-line for its estimated useful life;
- a IRC § 179 expensing deduction was claimed for the auto;
- the taxpayer has claimed the additional first-year depreciation allowance; or
- the taxpayer depreciated it using MACRS under IRC § 168.
Also, under current rules, the standard mileage rate can’t be used to compute the deductible expenses of five or more autos owned or leased by a taxpayer and used simultaneously (such as in fleet operations).
Rural mail carriers who receive qualified reimbursements also can’t use the standard mileage rate.
A taxpayer who uses the mileage allowance method for an auto he owns may switch in a later year to deducting the business connected portion of actual expenses, so long as he depreciates it from that point on using straight line depreciation over the auto’s remaining life. The depreciation deductions would still be subject to the dollar caps.
A taxpayer may use the mileage allowance method for a leased auto only if he uses that method (or a fixed and variable rate (FAVR) allowance method) for the entire lease period.
Other business mileage rate rules. For 2011, the depreciation component of the mileage rate is 22¢ per mile (was 23¢ per mile for 2010, 21¢ for 2009 and 2008, and 19¢ per mile for 2007). The depreciation component reduces the basis of the auto for gain or loss purposes.
Advantages of using standard mileage rate. For those taxpayers eligible to use it, the standard mileage rate offers the following advantages:
- Mileage rate users need not keep a record of actual expenses, or retain receipts where required. A record of the time, place, business purpose and number of miles traveled suffices.
- If an auto’s business expenses are deducted via the mileage rate, it is not subject to the IRC § 280F dollar caps or the special rules that apply if qualified business use does not exceed 50% of total use.
- The mileage rate method may yield bigger deductions than the actual expense method for a thrifty, high-mileage model.
Disadvantages of mileage rate method. The mileage rate method may produce a smaller deduction than would be obtained by claiming actual business-connected operating expenses plus depreciation (or lease payments). Also, use of the mileage rate method prevents the taxpayer from claiming regular MACRS deductions (subject to the luxury auto dollar caps) for the auto in later years.
Other applications of mileage allowance method. Employers that require employees to supply their own autos may reimburse them at a rate that doesn’t exceed 51¢ per mile for employment-connected business mileage during 2011 (50¢ per mile for 2010), whether the autos are owned or leased. The reimbursement is treated as a tax-free accountable-plan reimbursement if the employee substantiates the time, place, business purpose, and mileage of each trip.
FAVR allowance method. Employers may use a FAVR allowance method to reimburse employees who supply their own cars for business (whether the cars are leased or owned). For 2011, the standard auto cost used to compute the FAVR allowance cannot exceed $26,900 (down from $27,300 for 2010). For trucks or vans, the 2011 standard auto cost used to compute the FAVR allowance cannot exceed $28,200.
