The IRS Mileage Rate

Looking for the IRS mileage rate? Should you use it? This page answers all your questions! First of all, what is the IRS mileage rate? Simply put, it is a standard IRS mileage rate for your car expenses. It is an optional and simplified way of figuring the automobile expense deduction on your tax return. Each year, the IRS conducts a study of fixed and variable expenses to determine this rate. Obviously, the price of gas is an important factor in the study. For more information on how the IRS determines the standard IRS mileage rate, see Who determines the IRS mileage rate? With the soaring gas prices we've seen lately, it is not a surprise that the IRS mileage rate has increased!

IRS Mileage Rate Information:

Tax Year:	Business	Moving or Medical	Volunteer/ Charitable
2002 IRS Mileage Rate	36.5 Cents/Mile	13 Cents/Mile	14 Cents/Mile
2003 IRS Mileage Rate	36 Cents/Mile	12 Cents/Mile	14 Cents/Mile
2004 IRS Mileage Rate	37.5 Cents/Mile	14 Cents/Mile	14 Cents/Mile
2005 IRS Mileage Rate Jan 1 - Aug.31	40.5 Cents/Mile	15 Cents/Mile	14 Cents/Mile
2005 IRS Mileage Rate Sep. 1 - Dec. 31	48.5 Cents/Mile	22 Cents/Mile	14 Cents/Mile
2006 IRS Mileage Rate	44.5 Cents/Mile	18 Cents/Mile	14 Cents/Mile

Important:

Why are there two rates for 2005? During that year, gasoline prices jumped up sharply. If you drove a car during this time, you probably don't need to be reminded of that! In the interest of fairness, IRS raised the business mileage rate by 8 cents per mile. In fact, this is the greatest mileage rate increase we've seen to date. The moving and medical rate rose by 7 cents per mile.

This was of course a welcome break for taxpayers, but it also somewhat complicates the mileage expense calculation for that tax year. The solution, however, is simple: Simply determine your mileage for January through August and for September through December of 2005. Then multiply the miles driven for each period with their respective mileage rate.

Using the IRS Mileage Rate Method:

To use the standard IRS mileage rate, simply take your total miles driven during the year, subtract the miles driven for personal use, and then multiply the remaining miles with the appropriate IRS mileage rate from the table above

Example:

Your total car mileage for the 2003 tax year was 18,364 miles, of which 7,162 were for personal use and 11,202 were for business. To figure the irs mileage rate deduction, you would multiply 11,202 miles by the standard irs mileage rate for business
(36 Cents/Mile).

11,202 Miles x .36 = $4,032.72.

This is your business car deduction using the irs mileage rate method.
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Note: When using the IRS mileage rate method, keep in mind that the IRS mileage rate includes all costs for operating the car, including gas, wear and tear, depreciation, etc. The standard IRS mileage method does not include parking and tolls; you may claim these deductions on your tax return in their separate categories.

You should also know that not every taxpayer can use the standard IRS mileage rate. More on this a little later in these pages.

Now that you know a little more about the IRS mileage rate method, you might still have questions. Perhaps you are wondering whether or not you qualify for the standard IRS mileage rate. Also, although the IRS mileage rate method is simple to use, some people find that they are better off not using it. Fore more information, see: Should I use the standard IRS mileage rate method? If you are a subscriber to the Biztax eGazette (see link on navigation bar), I will let you know when the IRS mileage rate changes.