Business Standard Mileage Rate is Unchanged for 2012

The IRS has announced that the optional mileage allowance for owned or leased autos (including vans, pickups or panel trucks) will remain at 55.5¢ per mile for business travel after 2011—that is, unchanged from the July 1, 2011 mid-year adjustment. This rate can also be used by employers to reimburse tax-free employees under an accountable plan who supply their own autos for business use. The mileage rate for miles driven in service of charitable organizations will also remain the same at the July 1, 2011 mid-year adjustment at 14¢ per mile. The mileage rate to get medical care or in connection with a move that qualifies as a moving expense will decrease by .5¢ from the July 1, 2011 mid-year adjustment to 23¢ per mile.

The advantages to using the standard mileage rate include:

  • Mileage rate users need not keep a record of actual expenses, or retain receipts where required. A record of the time, place, business purpose and number of miles traveled suffices.
  • If an auto’s business expenses are deducted via the mileage rate, it is not subject to the Code Sec. 280F dollar caps or the special rules that apply if qualified business use does not exceed 50% of total use.
  • The mileage rate method may yield bigger deductions than the actual expense method for a thrifty, high-mileage model.
  • Mileage rate users may still claim separate deductions for parking fees and tolls connected to business driving.

The disadvantages to using the standard mileage rate include:

  • The mileage allowance deduction replaces separate deductions for lease payments (or depreciation if the car is purchased), maintenance, repairs, tires, gas, oil, insurance and license and registration fees.
  • The mileage rate method may produce a smaller deduction than would be obtained by claiming actual business-connected operating expenses plus depreciation (or lease payments).
  • The mileage rate method prevents the taxpayer from claiming regular MACRS deductions (subject to the luxury auto dollar caps) for the auto in later years.

Overall, if you travel a lot for business or medical purposes, keep track of the time, place, purpose, and number of miles traveled in order to deduct them on your tax return.