In recognition of the impact gas prices are having on the American public, the IRS has increased the standard mileage rate for business travel from 51 cents per mile to 55.5 cents per mile, effective July 1, 2011. As a result, if you use the standard mileage rate to figure your car expenses, you must use the 51 cents per mile to determine your deduction for miles driven from January 1, 2011, through June 30, 2011.
But for miles driven from July 1, 2011 through the end of the year, you must use the 55.5 cents per mile rate. The increase also affects you if you reimburse your employees for mileage under a plan that is tied to the standard mileage rate.
Tip. The standard mileage rate is a simplified method for computing the deductible costs of operating a car for business purposes. If you use the standard mileage rate to calculate your car expenses, you need to keep records of the number of miles driven and the business purpose of the trip. The standard mileage rate includes almost all of your vehicle costs, such as maintenance and repairs, tires, gas, oil, insurance, and license and registration fees. In contrast, the actual cost method requires receipts for all vehicle related expenses, as well as a computation of depreciation.
Medical and Moving Expense Rate Also Increased
If you use your car for medical visits or as part of a tax-deductible move, you will be able to use a 23.5 cents per mile rate for miles driven after July 1, 2011. For the first half of the year, the rate is 19 cents per mile. There is no change to the 14 cents per mile allowed if you drive your car while involved in charity work because that rate is set in the tax code.
Source:By Marcia Richards Suelzer
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