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For several different categories of deductions, there are standard rates set by the IRS for mileage. The deductions are for business-oriented mileage, both for your own business and for miles driven on behalf of an employer (if deductible), as well as for medical purposes, deductible moving costs, and for charitable activities.
These rates are set on a “per mile” basis. The IRS calculates the applicable costs associated with driving these miles on an annual basis, which includes the cost of fuel, maintenance, insurance, taxes, and the purchase price of the vehicle (or rather, depreciation). This allows for a much more simple method of deducting these costs rather than adding up all of the costs of a vehicle and then allocating an appropriate portion to the deductible use.
You can choose between using the mileage rate or adding up all of the costs for your vehicle use, but once you’ve started using one method for a particular vehicle (especially for business use, more detail below) you should stick with that method for the life of the vehicle.
Recently the IRS published their Newswire IR-2012-95, which lists and explains the standard mileage rates for 2013. The actual text of the Newswire is below.
2013 Standard Mileage Rates Up 1 Cent per Mile for Business, Medical, and Moving
The Internal Revenue Service today issued the 2013 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2013, the standard mileage rates for the use of a car (also vans, pickups, or panel trucks) will be:
- 56.5 cents per mile for business smiles driven
- 24 cents per mile driven for medical or moving purposes
- 14 cents per mile driven in service of charitable organizations
The rate for business miles driven during 2013 increases 1 cent from the 2012 rate. The medical and moving rate is also up 1 cent per mile from the 2012 rate.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
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. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.
These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51. Notice 2012-72 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.
