The Internal Revenue Service issued optional standard mileage rates used to calculate the deductible costs of operating automobiles, vans, pickups, and panel trucks for business, charitable, medical, or moving purposes: The 2013 rates are up 1 cent per mile for business, medical, and moving.
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 may not be used for any vehicle used for hire or for more than four vehicles used simultaneously.
Taxpayers always have the option of calculating the actual costs of using their vehicles rather than using the standard mileage rates. The actual costs would include gasoline, oil, repairs, insurance, tires, washing, maintenance, rent, and depreciation of the purchase cost. Use of the standard mileage rate in the first year of business use is considered an election to exclude the car from MACRS depreciation.
For automobiles owned by a taxpayer and used in a trade or business, and for which the business standard mileage rate is used, depreciation is considered to have been allowed at the rate of 23 cents per mile for 2012 and 22 cents per miles for 2011.
We recommend that you keep a separate daily diary of the travel and expenses for each of your automobiles to document such income tax deductions. If you would like more details and advice, please call the accountants at Pascarella Associates