Mileage - Rates for 2010 and Prior Years

IRS Announces 2009 Standard Mileage Rates

IR-2008-131, Nov. 24, 2008

WASHINGTON — The Internal Revenue Service today issued the 2009 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, 2009, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

55 cents per mile for business miles driven
24 cents per mile driven for medical or moving purposes
14 cents per mile driven in service of charitable organizations

The new rates for business, medical and moving purposes are slightly lower than rates for the second half of 2008 that were raised by a special adjustment mid-year in response to a spike in gasoline prices. The rate for charitable purposes is set by law and is unchanged from 2008.

The business mileage rate was 50.5 cents in the first half of 2008 and 58.5 cents in the second half. The medical and moving rate was 19 cents in the first half and 27 cents in the second half.

The mileage rates for 2009 reflect generally higher transportation costs compared to a year ago, but the rates also factor in the recent reversal of rising gasoline prices. While gasoline is a significant factor in the mileage rate, other fixed and variable costs, such as depreciation, enter the calculation.

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 as determined by the same study. Independent contractor Runzheimer International conducted the study.

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 any vehicle used for hire or for more than four vehicles used simultaneously.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Revenue Procedure 2008-72 contains additional information on these standard mileage rates.

You may deduct the business portion of your mileage. There are two methods available and both methods require that you to maintain a log book for proof that you use the vehicle for business purposes. (Percentage of Business Use)

Expense Method: You are required to calculate the mileage to obtain the percentage of business use. Then you are allowed to deduct only the business percentage portion of the cost of the vehicle (depreciation), gas, oil, maintenance, insurance and other related expenses. You may also deduct the percentage portion of the interest if purchasing the vehicle.

Mileage Method: Your are required to maintain a written record of the mileage. The mileage that is used for 6business is calculated as follows:

The above rates include 17 cents for the cost of the vehicle which is set by the IRS and the IRS codes.

Special Note: (Leased Vehicles)
Leased vehicle rules required you to keep accurate mileage log books. You are allowed a deduction for only the business percentage of use. Therefore, in order to make a deduction work, you are REQUIRED to keep accurate documentation. The mileage rate method is not allowed for leased vehicles as you are required to use the expense method. Keeping good accurate records includes lease payment, gas, oil, repairs, tires, insurance and other directly related cost. Again, you can only deduct the percentage portion of the business use as calculated with the log and or mileage log book.

Caution: Whatever method you start with, you are required to continue the use of that method for the life of the vehicle you are using at the time. Example: You purchase a vehicle in 2004 and start using the mileage method. You are required to continue using the mileage method for this particular vehicle until you dispose, sell or trade for another vehicle. You cannot mix or change methods until you change vehicles. Consult your tax advisor.

Please note, if you choose to not keep a mileage book or documentation to support your deductions then you can and most likely will lose your allowed deductions. Keeping the mileage records is very important!