Plan on using your vehicle for business purposes in 2015? The IRS has set forth its standard mileage rates for the year that tax payers like you can use as you calculate the deductible costs of using a car for business, charitable, medical or moving purposes.
Related: Tax changes for 2014.
Here are the standard mileage rates effective as of January 1st, 2015:
Business Use: 57.5 cents/mile
Charitable Use: 14 cents/mile
Medical Use: 23 cents/mile
Moving Use: 23 cents/mile
These rates reflect an increase of 1.5 cents per mile from last year on business mileage rates. Other rates are staying the same as 2014. The increase for business is definitely a good thing considering that the price of gas has continued to drop since late last year.
What Does That Mean For Me?
If you are self-employed or a small business owner and use your vehicle for any type of business purpose, you can use the business standard mileage rate to calculate the tax-deductible costs for using your vehicle. The IRS gives taxpayers the option of using their standard mileage rate instead of keeping track of the actual expenses of using and operating a vehicle.
Do you prefer to claim actual expenses? You are required to keep adequate records, track mileage and other sufficient evidence. This allows you to back up your claims and justify your actual expenses. Many people prefer to simply use the standard mileage rate because it involves less record keeping.
To claim the standard mileage rate, it is a requirement to keep track of the number of miles you drive for business purposes. This requires diligent record keeping in a notebook, mobile app, or some other software program. At the end of the year, you multiply the number of miles you drove for business purposes by the mileage rate to calculate your mileage deduction.
Does This Make a Big Difference?
It definitely can make a difference depending on how frequently you use vehicles for business purposes. For those who work out of an office close to home, the total deduction may not be a large amount. However, if you own a business that uses several vehicles that are on the road often, the mileage deduction can add up quickly.
This rate is also the standard rate that most employers use when they reimburse their employees who use their personal vehicles for business purposes. Not all employers do reimburse employees, but when they do, they typically use the same IRS mileage rate.
Do you have specific questions on how the new 2015 IRS mileage rates can affect your business? Call Hacker Accounting at 602-375-5251. We are happy to talk this through with you and help point out how it can be advantageous to your situation.