If you plan to use the standard mileage rates for calculating the deductible costs of operating an automobile for your business, you’ll want to make note of the 2015 rates recently issued by the IRS.
As of January 1, 2015 the standard mileage rate for use of an automobile for business purposes is 57.5 cents per mile (includes a 24 cent mile allocation for depreciation).
NOTE: With the recent drop in gasoline prices, it is likely that the IRS will adjust the mileage rate mid-year. So make sure to keep an eye out for a mid-year adjustment.
Some of you may be wondering how they come up with these rates and what goes into making adjustments. The standard mileage rate for business purposes is based on an annual study of the fixed and variable costs of operating an automobile. So, any sharp increase or decrease in fuel price is factored in.
There are various options when it comes to automobile expenses related to running your business. It is advised that you do your research upfront to determine the most advantageous method for your business. You need to select one method for treating business automobile expenses. You 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. It is also important to note that the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.
And don’t forget that you always have the option of calculating the actual costs of using your vehicle rather than using the standard mileage rates.
While we are on the topic of mileage rates, in addition to standard mileage rates for automobiles used for business, the IRS also provides rates for miles driven for medical, moving and charitable reasons. For 2015 these are;
* 23 cents per mile driven for medical or moving purposes; and
* 14 cents per mile driven in service of charitable organizations.
The rate for medical and moving purposes is based on the variable costs as determined by the same study used to determine rates for business. The rate for using an automobile while performing services for a charitable organization is statutorily set and has been 14 cents for over 15 years.
If you have questions related to best methods of deducting the business use of your vehicle or the documentation required, please give me a call.