The IRS recently announced in Notice 2010-88 the 2011 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving expense. Taxpayers are not required to use the optional standard mileage method and can use (substantiated) actual costs to operate a vehicle.
Beginning January 1, 2011, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) are:
- 51 cents per mile for business miles driven;
- 19 cents per mile for medical or moving purposes; and
- 14 cents per mile driven in service of charitable organizations.
The 2010 rates for the above categories were 50.0, 19 and 14 cents per mile driven, respectively.
The standard mileage rate for business is determined based on an annual study of the fixed and variable costs of operating an automobile (including the depreciation of a vehicle); the standard rate for medical and moving purposes is based on the variable costs as determined by the same study. The mileage rate for charitable work is determined by law.
To use the standard mileage rate, the cost of an automobile may not exceed $26,900 and trucks and vans may not exceed $28,200.
Keep in mind that a taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.
? Planning Tip: A taxpayer may not deduct any portion of the cost of operating a vehicle attributable to personal use. Personal use includes the daily commute from your residence to your place of business.
? Planning Tip: The IRS requires taxpayers who claim a mileage deduction to maintain contemporaneous records showing the date, business mileage, and business purpose of the trip. The IRS will disallow the tax deduction if the mileage log is not maintained. For those clients who incur mileage for business, medical or charitable purposes, if you complete the KFS tax organizer telling us to use last year’s mileage, you are informing us that you did not maintain a mileage log and are thus not entitled to the tax deduction. Always submit your actual mileage if claiming a mileage tax deduction.
? Planning Tip: Whether the taxpayer elects to use actual costs or the standard mileage deduction, the taxpayer must maintain a mileage log.
