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Every time you fill up at the pump these days, you're reminded that operating a vehicle isn't cheap. Fortunately, there is some relief from the IRS.
As gas prices rise over time, the IRS responds by increasing the standard mileage rates you can deduct for various purposes.
In addition, several changes were made to the deductions for business driving as of 2005. One of the biggest: Taxpayers who use up to four vehicles at the same time for business purposes can use the standard mileage rate. Previously, these same taxpayers were not allowed to use the standard rate at all.
The table below lists mileage rates for 2006 and 2007:
| Standard mileage rates |
2006
|
2007
|
| Business miles |
44.5 cents |
48.5 cents |
| Miles driven for medical or moving expenses |
18 cents |
20 cents |
| Miles driven in service of a charity |
14 cents |
14 cents |
Although the standard mileage rate is easier for recordkeeping purposes, you almost always get a larger deduction by keeping track of actual expenses. You can write off the business-use percentage of operating costs such as gasoline, oil, maintenance and insurance. Plus, you can deduct depreciation.
To use the actual expense method, you must keep a log to record the time, place, mileage and purpose of each business trip, along with the the total mileage for the year. That lets you calculate the business use percentage.
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Contact us to learn the most tax-effective ways to operate vehicles for business purposes. |
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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