Recently the IRS published the mileage rates for various classes of deductible miles driven for tax year 2014. This amount is used in place of managing, collecting and tabulating the exact costs involved in operating a vehicle throughout the year.
In order to use the standard mileage rates, you just track the miles you drive for each purpose (see below) and then compute the deductible mileage on your tax return when you file it the following year. Keep a log of the miles driven and the purpose of the trip to substantiate the deduction. This can be as simple as a paper calendar with your log notes, or more elaborate (check around, I bet there are apps out there for your iphone or other gadgets to do this).
You have a choice to either use the standard rate or the actual expense of operating your vehicle. In either case, parking and toll costs associated with the applicable mileage can be an additional deductible expense.
For business purposes, you’ll take the deduction on your Schedule C as a sole proprietor, on Form 1065 for a partnership, or form 1120 as a corporation, along with your other business expenses. Commuting from your home to your place of work is not allowed as a mileage deduction, but travel from your home or office to a temporary work location (for example, as a contractor) or to a client’s location (e.g., sales) can be deductible mileage.
As an employee, unreimbursed mileage (same restrictions as above) can be deducted using Form 2106 (Unreimbursed Employee Business Expenses), carrying the deductible expense to your Schedule A, where it will be subject to the 2% floor, along with your other miscellaneous expenses.
The rate for business mileage for 2014 is 56 cents per mile. This is a reduction of ½¢ per mile over the 2013 rate.
Certain mileage expenses for auto use when you are moving to a new home can be deducted, using Form 3903, Moving Expenses. Travel is limited to one trip per person, however, each member of the household can move separately and at separate times. All of the other requirements for moving expenses must be met (time and distance test, and work test).
In addition, mileage driven for medical purposes can be deducted on your Schedule A along with your other medical expenses, subject to the 10% floor and AGI limits (7.5% floor if you’re age 65 or older). This includes travel for any medical purpose, as long as it’s a legitimate medical purpose. An example would be to track your regular visits to the doctor throughout the year and deduct the mileage from your income for tax purposes.
The rate for both types of mileage for 2014 will be 23.5 cents per mile, also down by ½¢ per mile over the 2013 rate.
If you use your personal vehicle for charitable purposes, such as hauling your items to donate to the Goodwill store, you can deduct the mileage along with your other non-cash charitable contributions on Schedule A.
The standard mileage rate for charitable purposes for 2014 is 14 cents per mile, which is unchanged from 2013.