Whenever you drive for business, medical reasons, or in support of a charitable organization, you can probably deduct the mileage from your taxes if you itemize your deductions on your tax return. Last month, the IRS released updates to the “standard mileage rates” when you use your vehicle to drive for business, medical or moving purposes, or in service of a charitable organization:
- Business miles: 51 cents per mile
- Medical or moving purposes: 19 cents per mile
- Charitable organization: 14 cents per mile
In general, you can only claim the deduction if you use your personal vehicle. For example, a vehicle that was purchased by a business cannot claim business mileage (specifically, it is excluded if the vehicle is being depreciated under MACRS or if it was claimed as a Section 179 deduction).
For example, if you are a salesperson and your employer provides a company car, you will not be able to claim business miles. If you deliver pizzas with your personal vehicle and your employer doesn’t compensate you for your car, then you can claim the miles driven.
Advice on keeping records has always been pretty spotty but it’s everyone agrees that it’s important that you keep a log of your driving. Some experts recommend keeping a journal in your car to record the date, distance, odometer readings, and purpose of the trip. If you are able to show good records of your deduction, you can only hope for the best in case the IRS audits you. The IRS audits only approximately 1% of all tax returns every year.
With business mileage, your commute to work cannot be deducted. Any driving you may do that isn’t part of the “leg” home can be included. Let’s say you’re a construction foreman and you have a desk in a corporate office that you check into each day. After checking in, you drive to the work site in your personal car. At the end of the day, you drive directly home. You can deduct the business mileage of driving from the office to the work site (but not from the work site to your home) as long as your employer doesn’t reimburse you.
You can claim medical miles for those that you drive to receive medical care, be it for you, your spouse, or your children. The amount of this deduction is added to your medical deduction, which means it will only be included if your total medical expenses exceed 7.5% of your adjusted gross income.
You can claim moving mileage if you move to take a new job, your new job is at least 50 miles away from your home, and you start working within the first year you live in your new place for at least 39 weeks (these are referred to as the “time and distance” requirements for claiming a deduction for moving expenses).
You can claim charitable mileage for any driving you do in service of a charity or volunteer project.
Finally, there’s also another change for 2011. You will now be cable to claim the standard mileage rate for cars used for hire like taxicabs.