Business Standard Mileage Rate Drops For 2014

The optional business standard mileage rate will decrease from 56.5 cents-per-mile for 2013 to 56 cents-per-mile for 2014, the IRS has announced (IRS News Release IR-2013-95; Notice 2013-80, 2013-52 IRB __). The optional standard mileage rate for qualified medical and moving expenses will also decrease for 2014. The rate for charitable miles driven is set by statute and remains unchanged for 2014.

Comment

"No one was surprised that the optional standard mileage rate decreased. Oil prices have held relatively steady the past few months which in turn affects the price of gas," Cindy Hockenberry, EA, Manager, Tax Knowledge Center, National Association of Tax Professionals (NATP), told CCH. "We’ve seen the price of gas come down so it’s only natural to assume the standard mileage rate would reflect that. A drop of a half a cent won’t have that much of an impact overall."

Comment

As an alternative to the optional mileage rates, taxpayers can use the actual expense method. Actual expenses include expenditures for gas, oil, repairs, tires, insurance, registration fees, licenses, and other qualified costs.

The business and medical/moving rates are calculated by the IRS and an independent contractor. Included in the calculation are the fixed and variable costs of operating a motor vehicle, such as expenses for fuel and maintenance.

Mileage rates. For 2014, the business standard mileage rate will be 56 cents-per-mile. The rate for qualified medical/moving expenses will be 23.5 cents-per-mile. The rate for charitable miles driven remains at 14 cents-per-mile by statute.

Depreciation/FAVR. For 2014, the depreciation component of the business standard mileage rate will be 22 cents-per mile, which is a decrease of one cent from the depreciation component for the 2013 business standard mileage rate. The standard automobile cost may not exceed $28,200 for automobiles; $30,400 for trucks and vans for purposes of computing the allowance under a FAVR plan. In contrast to other amounts, these amounts reflect an increase from 2013 levels (an additional $100 for automobiles and an additional $500 for trucks and vans).

Limitations. To use the business standard mileage rate, the taxpayer must not operate four or more vehicles at the same time, such as in a fleet vehicle operation. Also, 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 Code Sec. 179 deduction for the vehicle, the IRS explained.

Effective date. The revised rates apply to deductible transportation expenses paid or incurred for business or medical/moving expenditures, or qualified charitable miles driven, on or after January 1, 2014.

Reference: PTE §8,020