Standard Mileage Method
The Standard Mileage Method is a taxation method that permits taxpayers to deduct business automobile expenses based on a standard mileage rate set by the IRS. It provides an alternative to keeping detailed records of actual car expenses, such as gas, oil, insurance, and repairs. This method simplifies the process of claiming deductions for those who drive their own or leased vehicles for business, medical, or charity purposes.
Key Features
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Standard Rates: The IRS sets standard mileage rates for different types of travel:
- Business Travel: permissible deduction per mile driven for business purposes.
- Medical or Moving Purposes: specific rate per mile for travel related to healthcare or relocating.
- Charitable Service: rate for miles driven in service to a charitable organization.
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Rates in 2011:
- Business Travel: 51 cents per mile.
- Medical or Moving: 19 cents per mile.
- Charitable Service: 14 cents per mile.
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Additional Deductions: Expenses such as parking fees and tolls can be added to the standard mileage deduction.
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Record Keeping: As an alternative, taxpayers can keep detailed records of actual automobile expenses and use those figures for deductions.
Example Scenarios
- Business Travel: If a salesperson drives 1,000 miles for business and the standard rate is 51 cents per mile, they can claim a deduction of $510.
- Medical Travel: Travel for medical appointments totaling 200 miles can be deducted at 19 cents per mile, resulting in a deduction of $38.
- Charitable Service: If 100 miles are driven for charity work, at a rate of 14 cents per mile, the deduction would be $14.
Frequently Asked Questions (FAQs)
Q1. Can I switch between the Standard Mileage Method and actual expense method each year?
A: Yes, taxpayers can choose each year whether to use the Standard Mileage Method or the actual expense method, but there are specific rules and limitations, especially for leased vehicles.
Q2. Are parking fees and tolls included in the standard mileage rate?
A: No, parking fees and tolls can be deducted in addition to the standard mileage rate.
Q3. Can I use the Standard Mileage Method for a leased vehicle?
A: Yes, but once you choose the Standard Mileage Method for a leased vehicle, you must use it for the entire lease period.
Q4. What kind of records should I keep when using the Standard Mileage Method?
A: Keep a log that documents the date, purpose, and mileage of each trip. Records of parking fees and tolls are also necessary for additional deductions.
Q5. Is commuting to and from work deductible under the Standard Mileage Method?
A: No, commuting expenses between your home and regular place of work are not deductible.
Related Terms
Actual Expense Method
A method for deducting car expenses based on actual costs such as gas, oil, insurance, repairs, and depreciation.
Depreciation
An income tax deduction allowing for the decrease in the value of an asset over its useful life.
Business Expense Deduction
Any deduction that is ordinary and necessary to a business’s operations, including automobile expenses.
Online References
Suggested Books
- “Tax Deductions for Professionals: Pay Less to the IRS” by Stephen Fishman J.D.
- “J.K. Lasser’s Small Business Taxes 2023: Your Complete Guide to a Better Bottom Line” by Barbara Weltman
- “Master Your Taxes” by Keven L. Moore
Fundamentals of Standard Mileage Method: Taxation Basics Quiz
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