Share

IRS Mileage Rates 2002-2012: How to Deduct Business Cars, Trucks, SUVs and Vans

Overview

 

This article discusses the current IRS mileage rates, who can claim the business IRS standard mileage rates, how to calculate your business IRS standard mileage deduction, and how depreciation factors into the equation. In general, the IRS mileage rate is for the individual taxpayer, and it is used in lieu of actual expenses to compute vehicle operating expenses for business, charitable, medical, or moving purposes. However, even when you take advantage of the IRS mileage rates, you still must keep a mileage log for all business, charitable, medical or moving miles driven. The chart below details the IRS standard mileage rates in effect from 2002 through 2012.

 

Time Period

IRS Mileage Rate (in cents per mile)

20121

Business

55.5

 

Charitable

14.0

 

Medical & Moving

23.0

2011, July 1 – December 312

Business

55.5

 

Charitable

14.0

 

Medical & Moving

23.5

2011, January 1 – June 303

Business

51.0

 

Charitable

14.0

 

Medical & Moving

19.0

20104

Business

50.0

 

Charitable

14.0

 

Medical & Moving

16.5

20095

Business

55.0

 

Charitable

14.0

 

Medical & Moving

24.0

2008, July 1 – December 316

Business

58.5

 

Charitable

14.0

 

Medical & Moving

27.0

2008, January 1 – June 307

Business

50.5

 

Charitable

14.0

 

Medical & Moving

19.0

20078

Business

48.5

 

Charitable

14.0

 

Medical & Moving

20.0

20069

Business

44.5

 

Charitable

14.0

 

Medical & Moving

18.0

2005, September 1 – December 3110

Business

48.5

 

Charitable

14.0

 

Medical & Moving

22.0

2005, January 1 – August 3111

Business

40.5

 

Charitable

14.0

 

Medical & Moving

15.0

200412

Business

37.5

 

Charitable

14.0

 

Medical & Moving

14.0

200313

Business

36.0

 

Charitable

14.0

 

Medical & Moving

12.0

200214

Business

36.5

 

Charitable

14.0

 

Medical & Moving

13.0

 

Who can Claim the IRS Standard Mileage Rate?

 

You may not use the standard mileage rate if you.

 

·

Operate your business as a corporation and claim the vehicle as a corporate expense;

 

·

Use the vehicle for hire, as in the case of a taxicab;

 

·

Use five or more vehicles at the same time in your business;

 

·

Claim a depreciation deduction on the vehicle using any method other than straight line (such as MACRS or bonus depreciation);

 

·

Claim section 179 expensing on any part of the vehicle, or

 

·

Claim actual expenses on a leased vehicle.

 

Example. Alternating Five Vehicles

 

Marcia, a salesperson, owns three cars and two vans that she alternates for her use in calling on customers. She can use the standard mileage rate to calculate her business deductions for the three cars and the two vans because she does not use them at the same time.15

 

Calculating your Business IRS Standard Mileage Deduction

 

The 2012 standard mileage rate for transportation expenses is 55.5 cents per mile for all miles driven for business purposes. To calculate your deduction, you multiply the business standard mileage rate by the number of business miles traveled.

 

The business standard mileage rate is computed on a yearly basis and it is in lieu of deductions for your vehicle’s operating expenses and depreciation. When you take advantage of the business standard mileage rate, you may not deduct:

 

·

Depreciation (or lease payments),

 

·

Maintenance and repairs,

 

·

Tires,

 

·

Gasoline (including all taxes therein),

 

·

Oil,

 

·

Insurance, and

 

·

License and registration fees.

 

However, in addition to IRS standard mileage rate deductions, the Schedule C taxpayer may deduct business expenses for:

 

·

Parking fees,

 

·

Tolls, and

 

·

Interest on the business percentage of the loans used to purchase the vehicle.

How does Depreciation Factor into the Equation?

 

You depreciate your vehicle when you use IRS mileage rates. Thus, you realize gains or losses when you sell an IRS mileage rate vehicle to a third party. The chart below details the IRS depreciation figures in effect from 2003 through 2012.16

 

Year

Depreciation In Cents Per Mile Inside the IRS Mileage Rate

2012

23

2011

22

2010

23

2009

21

2008

21

2007

19

2006

17

2005

17

2004

16

2003

16

 

Example. Using the IRS Mileage Rate to Compute Your Deductions.

 

John Roberts, a self-employed taxpayer filing Schedule C, bought a Ford Mustang in January of 2003 for $31,785. He drove 18,000 miles per year, except in 2010 when he drove only 9,000 miles. Below, in four steps, we calculate John’s business loss with an estimated selling price equal to a wholesale value of $5,000 for the Mustang.

 

Step 1. Compute Gross Depreciation (The Business Part Comes Last—In Step 4)

 

Year

Depr/Mile

Miles

Total

2003

0.16

18,000

$2,880

2004

0.16

18,000

$2,880

2005

0.17

18,000

$3,060

2006

0.17

18,000

$3,060

2007

0.19

18,000

$3,420

2008

0.21

18,000

$3,780

2009

0.21

18,000

$3,780

2010

0.23

9,000

$2,070

Total Depreciation on 117,000 miles

$24,930

 

Step 2. Compute Adjusted Basis

 

Purchase Price

 

$31,785

 

Less Depreciation

 

-$24,930

 

Adjusted Basis

 

$6,855

 

 

Step 3. Compute Loss on Sale

 

Selling Price

 

$5,000

 

Subtract Adjusted Basis

 

-$6,855

 

Loss on Sale

 

-$1,855

 

 

Step 4. Compute the Business Part of the Loss

 

Multiply the gross loss computed above by the percentage of business use to find the tax-deductible business loss. For example, John’s gross loss is $1,855. If he drove the Mustang 91 percent for business, his tax-deductible business loss on the sale of this car is $1,688.05 ($1,855 times 91 percent).

 

IRS Mileage Rate for Leases

 

This is generally a bad deal. Why? The lease includes an interest component, but the mileage rate does not consider interest in the mileage rate. Thus, the side-by-side comparison usually shows that the mileage rate is a loser on a lease.

 

Here’s another important thing to know. If you use the IRS business standard mileage rate on a leased vehicle, you must use the mileage rate on this vehicle for the entire lease period, including renewals.17

 

To stay on top these and future tax law changes, we suggest that you read the monthly articles published online at the Bradford Tax Institute. We provide cutting-edge tax information for the self-employed, the one owner business, and the husband and wife owned business.

 

If you're already a subscriber to the Tax Reduction Letter, you will be prompted to log in when you CLICK HERE.

If you are not yet a subscriber, CLICK HERE. You'll get a no-obligation 7-day FREE trial during which you can read all of our helpful tax saving tips from the last two months. This trial is absolutely free and there are no strings attached.

 


 

1    Notice 2012-01

2   Announcement 2011-40.

3    Notice 2010-88.

4    Rev. Proc. 2009-54.

5    Rev. Proc. 2008-72, IR-2008-131.

6    IR-2008-82.

7    IR-2007-192.

8    IR-2006-168.

9    IR-2005-138.

10    IR-2005-99.

11    IR-2004-139.

12    IR-2003-121.

13    Rev. Proc. 2002-61.

14    Rev. Proc. 2001-54.

15    IRS. Pub. 463; Rev. Proc. 2009-54.

16    Rev. Proc. 2008-72; Notice 2010-88.

17    Rev. Proc. 2008-72.