If you drive a lot for business purposes–or medical purposes–the IRS is offering a little bit of relief to offset rising gas prices. The IRS just announced the standard mileage rate for travel for business or medical purposes is going up by almost 5 cents/mile. It might not sound like a lot, but if you drive a lot for business, it can easily add up to hundreds, possibly thousands, in additional deductions. The new rate will be 55.5 cents per mile for business travel and 23.5 cents per mile for medical travel.
One thing to note is the new rate goes in affect July 1, 2011, so it will only apply to mileage driven in the latter half of the year. It’s a
good idea requirement when deducting mileage that you keep a log of your mileage that includes the purpose and the date. So you’ll need to pay attention when adding up mileage this year to make sure you take the larger deduction for all your miles after July 1.
Another thing to keep in mind is if you take the standard mileage rate for business travel, that means you don’t deduct your cost of gas, maintenance, insurance, etc. You must choose to either deduct the standard mileage rate, or add up all of your actual expenses and deduct a portion of those expenses that corresponds to your business usage.
For those who drive for charitable purposes, you might be wondering if this will increase your charitable deductions at all. Unfortunately, no. The current charitable rate remains at 14 cents a mile. So the IRS doesn’t like charities, huh? Actually, no, this is a case of the IRS giving the break, while Congress is being stingy. The deduction rate for charity is set directly by the IRS, and they haven’t touched it in a long time. However, Congress left it up to the IRS to set the rate for business and medical miles, and the IRS has regularly adjusted the rate to keep up with rising costs. So who would have thought…the IRS is the good guy here ;-)