The IRS has issued the 2012 optional standard mileage rates used for deducting the costs of operating an automobile for business, charitable, medical or moving purposes.
- 55.5 cents per mile for business miles driven
- 23 cents per mile driven for medical or moving purposes
- 14 cents per mile driven in service of charitable organizations
These rates are effective as of January 1, 2012 and reflect very little in the way of movement from those rates which were effective as of July 1, 2011 (a rare mid-year change). The rate for business miles has not been changed while the rate for medical or moving purposes actually went down by a half cent (yes, really).
The rate for charitable organizations remains unchanged and has for nearly 15 years. That rate is not adjusted for the cost of living (yes, it’s shameful) and is set by Congress.
Under the current rules, you can generally use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate. I know that seems odd but it’s a quirky little provision that might save you a few tax dollars.
Taxpayers also have the option of deducting “actual car expenses” rather than the standard mileage rate. “Actual car expenses” are exactly as advertised on the tin: the actual costs allocable to the use of the car. This includes depreciation or lease payments, maintenance and repairs, tires, the cost of gas, oil, insurance, and license and registration fees. To figure your deduction, total your expenses each year. The portion attributable to the business use of the car is and deductible; if the car is used for personal and for business use, the costs must be pro-rated.
Keep in mind that timing and ownership are important when deciding which method to use. If you want to use the standard mileage rate and you own the car, you have to claim it in the first year the car is available for use in your business; in later years, you can claim either the standard mileage rate or actual expenses. However, if you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. You must make the choice by the due date, including extensions, of your return and you cannot revoke the choice.
Regardless of whether you choose the standard mileage rate or actual car expenses, parking fees, tolls, interest and taxes are separately deductible for business, medical, moving and charitable purposes. Be sure and keep good receipts to substantiate those costs.