IRS Increases Mileage Rates for 2013

We've received some questions on the new mileage deductions in operating a vehicle so allow us to further clarify.  If  you are a business owner that uses your personal vehicle for business purposes or are planning on moving in 2013 the IRS has issued the new 2013 standard mileage rates. These rates are used to calculate the deductible costs of operating an automobile for business, charitable, medical and moving purposes.

Starting on January1, 2013, the new standard mileage rates for the use of a car, van, pickup or panel trucks increased to the following rates:

• Business – The rate increased to 56.5 cents per mile driven for business purposes, a one cent increase over the 2012 mileage rates. This rate is based on an annual study of the fixed and variable costs of operating an automobile.
• Medical/Moving – The rate increased to 24 cents per mile driven for medical/moving purposes, a one cent increase over the 2012 mileage rates
• Charity – The rate increased to 14 cents per mile driven in service to charitable organizations, again a one cent increase over the 2012 mileage rates.

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

Limitations

It’s important to note there are limitations on how the standard mileage deduction rates may be used. A taxpayer is prohibited from using these rates on any vehicle that has been depreciated using the Modified Accelerated Cost Recovery System or after claiming a Section 179 deduction for a vehicle. Finally, the business standard mileage rate is not permitted to be used for more than four vehicles at the same time.

In addition to these limitations, there are several rules that need to be followed when using the standard mileage rate to calculate the amount of deductible business, moving, medical or charitable expenses. More specific information can be found in the IRS Rev. Procedure 2010-51. There are several variables to consider when determining if and how to use these standard mileage rates. We encourage you to speak with your tax advisor to determine the best option possible for your situation, you're always welcome to contact us to discuss.