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STANDARD MILEAGE RATES INCREASE FOR 2009

By: Julian Block

The Tax Adviser

For business driving, actual expenses include gas, oil, tires, repairs, license tags, registration fees, insurance, garage rent, lease payments and depreciation. As an alternative to claiming actual expenses, you may be able to use a standard mileage rate that is adjusted annually to reflect inflation and gas prices. The rate’s advantage is that it eliminates the extra burden of tracking actual costs; records need to be kept only of business miles driven for the year in question. Just to be clear, the IRS definition of “cars” includes vans, pickups and panel trucks.

For 2009, the standard rate is 55 cents per mile. For 2008, it was 50.5 cents for January through June and 58.5 cents for July through December.

Do you qualify to claim both actual expenses and the mileage rate? Then there is just one way to know which option provides a larger write-off: figure your deduction both ways. Usually, actual expense is more advantageous than the per-mile rate, especially when there is a surge in price at the pump or your vehicle is a gas-guzzler. But the reverse can be true for those who have extremely low outlays or scant business mileage.

Employees and self-employed persons who move for business-related reasons and use their cars to transport themselves, members of their households or their belongings are able to deduct actual costs of gas and oil or a standard rate for 2009 of 24 cents. For 2008, it was 19 cents per mile for the first six months and 27 cents for the final six months.

Similarly, individuals who require medical care and drive to and from doctors, hospitals and the like can deduct actual costs of gas and oil or a standard rate for 2009 of 24 cents.

Persons who use their cars to perform services for such charitable organizations as schools and religious institutions can deduct actual costs of gas or oil or a standard rate of 14 cents for all of 2009, a rate set by law, not the IRS.

Besides claiming mileage allowances, remember to take separate deductions for parking fees, as well as bridge, tunnel and turnpike tolls. And drive within speed limits. The feds forbid deductions for traffic tickets. It matters not that you were on the way to an important business meeting.

A business-driving example: For 2009, Dodi drives 10,000 miles and pays $100 for parking and tolls. Her allowable deduction is $5,600 — $5,500 (10,000 times 55), plus $100.

If the IRS examines your returns and scrutinizes car write-offs, it will not dispute standard-rate deductions, as long as you are able to verify the miles driven; the agency disregards actual expenses. So it is prudent to keep glove-compartment diaries or other records in which you list the details of when, how far and why you went, along with charges for parking and tolls.