For those who are frequently on the road for work, the costs of operating and maintaining a vehicle can represent a substantial business expense. In computing the deductible costs of operating a vehicle for business, a taxpayer may elect to calculate expenses using the standard mileage rate. Despite the recent drop in fuel prices, the IRS has increased the business standard mileage rate for 2015. Beginning on January 1, 2015, the standard mileage rate for business miles driven in a car, van, pickup, or panel truck is 57.5 cents per mile. The 2014 standard mileage rate was 56 cents.
The IRS fixes the standard mileage rate based on the fixed and variable costs of operating a vehicle, taking into account fuel, insurance, maintenance, and depreciation. The standard mileage rate is intended to spare taxpayers the burden of tracking all vehicle operation costs, but taxpayers do have the option to claim deductions using actual costs in place of the standard mileage rate. However, certain taxpayers may not use the standard mileage rate. Taxpayers who have claimed accelerated depreciation on the vehicle, including the Section 179 expense deduction, may not elect to use the standard mileage rate. Also, owners of a fleet with more than four vehicles in service simultaneously are prohibited from electing the standard mileage rate.
Taxpayers also may claim deductions, subject to certain limitations, for miles driven for medical purposes, moving, and in service of a charitable organization. The 2015 standard mileage rate for medical and moving purposes is 23 cents per mile, while the rate for miles driven in service of a charitable organization is 14 cents per mile.
As a reminder, these rates are for miles driven in 2015, to be used on tax returns that will be filed in 2016.