WASHINGTON — The Internal Revenue Service today issued the 2011 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2011, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 51 cents per mile for business miles driven
- 19 cents per mile driven for medical or moving purposes
- 14 cents per mile driven in service of charitable organizations
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.
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 Section 179 deduction for that vehicle.
In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. The IRS is requesting public comments on whether taxpayers should be allowed to use the business standard mileage rate in this circumstance.
Beginning in 2011, a taxpayer may use the business standard mileage rate for vehicles used for hire, such as taxicabs.
Also beginning in 2011, the standard mileage rates are announced in a separate notice, which also provides the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate and the maximum standard automobile cost for automobiles under a FAVR allowance. The IRS plans to discontinue publishing the standard mileage rate revenue procedure annually but will publish modifications as required.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
Revenue Procedure 2010-51 and Notice 2010-88 contain additional details regarding the standard mileage rates.
Please note the two ways of calculating. You can use the fixed amount (51 cents) or collect your receipts for gas, maintenance, etc. I've had the time to do both in the past and usually came out ahead on the 51 cents.If you have a newer car with great gas mileage, the 51 cents per mile is probably your best option. You are getting better than the average $/mile vehicle and your maintenance cost will be rather low due to warranty that will cover most problems with your vehicle.
The receipt method may be more practical if you your vehicle is older and not gas efficient. You'll spend more money on gas per mile and your maintenance cost has a potential of being higher due to repairs, parts replacement, milestone services.
At Total Payroll Solutions, we can figure your per mileage rate. I suggest to my clients who use this rate to still keep track of receipts and compare both methods at the end of the year and see which one is better and make adjustments.
Please contact me if you would like more information regarding this notice or acquiring our payroll services. You can use contact us or request a quote through our website www.tpspayroll.com.
James Petty
Total Payroll Solution
