Sunday, July 31, 2011

Work-Related Driving - IRS Mileage Rate Tax Deduction

What is the IRS mileage rate:
The IRS mileage rate, also known as the standard mileage rate the IRS is an amount that the federal government lets you deduct for each mile you drive or work for commercial purposes. The IRS mileage rate provides an alternative method to calculate the deduction for car expenses when you use in your business or your employer. In a recent fiscal year, the IRS mileage rate allows taxpayers to deduct 50 cents for each mile traveled. So if your employer requires you to use a personal vehicle as part of its work and will not be reimbursed using the IRS mileage rate only allows you to keep track of the miles that the work unit and multiply the total by the end of the year the mileage rate to reach your deductible expense car.

Alternative to the IRS mileage rate:
If you decide not to calculate your deduction for car expenses with the IRS mileage rate, you must use your actual car expenses to calculate your deduction. This includes the lease payments, car insurance, repairs, gasoline and oil, and any other costs associated with your vehicle. However, calculating the actual cost is more efficient for companies that use the vehicle exclusively for business. But if you are an employee who uses a car for both personal and business purposes, you must assign actual costs for each type of use and the costs of staff car are not tax deductible. For example, if you put 10,000 miles on the car during the year and 6,500 of them relate to your job, then you can not take a tax deduction equal to 65 percent of its actual costs. You can, however, calculate the deductions using the IRS mileage rate and use the method that produces the greater deduction.

Reports IRS mileage rate deductions:
If you claim a deduction for the miles of work you put in your car, you must report as an expense related to working with your other itemized deductions in Schedule A and attach it to your Form 1040. However, if you claim the mileage rate as a business expense, to submit a report on the tax form used to report your business income and deductions such as Schedule C, Form 1120 or 1120A.

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