IRS To Increase Deductible Mileage Allowance
Thursday June 26, 2008
The IRS has announced that it is increasing the standard IRS mileage rate for driving a car for business or medical purposes is increasing by eight cents, from 50.5 cents per mile to 58.5 cents per mile beginning July 1st "in recognition of recent gasoline price increases".
The increase in the IRS mileage rate is welcome news for those who use a vehicle in conducting business. It does create a bit more tax complexity since part of the year you'll need to claim the lower rate and then claim the higher IRS mileage rate for business miles driven after July 1st. However, this is not uncommon, and tax preparation packages such as TurboTax are able to calculate the correct deduction for you.
You will also want to try computing your vehicle expense deduction both ways - by taking the deduction using the allowed IRS mileage rate and by the overall allowable cost deductions multiplied by a percentage, derived by taking the number of business miles driven divided by the total miles the car was driven for both personal and business use during the tax year. In many cases, the percentage method will result in a larger deduction, especially if you have high registration, insurance and maintenance costs on your car and you don't use the car very much for personal use. Keeping good records on your vehicle usage and expenses remains of paramount importance in maximizing your auto expense deduction.
Related topic: Deducting Car and Truck Expenses (About Tax Planning:US)
The increase in the IRS mileage rate is welcome news for those who use a vehicle in conducting business. It does create a bit more tax complexity since part of the year you'll need to claim the lower rate and then claim the higher IRS mileage rate for business miles driven after July 1st. However, this is not uncommon, and tax preparation packages such as TurboTax are able to calculate the correct deduction for you.
You will also want to try computing your vehicle expense deduction both ways - by taking the deduction using the allowed IRS mileage rate and by the overall allowable cost deductions multiplied by a percentage, derived by taking the number of business miles driven divided by the total miles the car was driven for both personal and business use during the tax year. In many cases, the percentage method will result in a larger deduction, especially if you have high registration, insurance and maintenance costs on your car and you don't use the car very much for personal use. Keeping good records on your vehicle usage and expenses remains of paramount importance in maximizing your auto expense deduction.
Related topic: Deducting Car and Truck Expenses (About Tax Planning:US)
Comments
No comments yet. Leave a Comment