IRS Increases Mileage Rate to 55.5 cents per Mile

Starting July 1st, 2011, your business miles are going to be a lot more valuable. For every mile you drive, the IRS will let you write off 55.5 cents, up from 51 cents for January 1st through June 30th. What does this mean for you?

  • Capture every deductible mile! Yes, that means keeping a mileage log and using it regularly, but think about all those trips that you might be missing. Running deposits in to the bank, dropping off mail at the post office, even making an office supply run.  Track all these trips in your mileage log and you’ll be adding $55.50 of deductible business expenses to your books for every 100 miles you drive.
  • Be very careful to track mileage for January 1st through June 30th separately from mileage for July 1st and beyond. The increase in the deductible mileage rate is only applicable to miles driven on July 1st and later.
  • While you’re tracking your mileage, be sure to capture miles driven for charitable purposes. These might include miles driven to PTA meetings or other nonprofit groups, miles driven to donate used household goods, or even miles driven to volunteer for a benefit walk or for the starting point for a charitable bike ride (my favorite is the Battle Against Hunger – BattleAgainstHunger.org).  For example, if you drive to your church/synagogue/masque to provide volunteer office work once every week, you can deduct the round-trip mileage at the “Charitable Contribution” rate of 14 cents per mile.

The IRS stated that the increased mileage rate was a direct result of the increased gas prices that we’ve experience this year.

Too hip for a paper mileage log?  The App Store on lists several mileage apps, including MileBugMileTracker and Trip Cubby, all for less than $5.

From IR-2011-69 – June 23, 2011

“WASHINGTON — The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2011. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business and other purposes.

The rate will increase to 55.5 cents a mile for all business miles driven from July 1, 2011, through Dec. 31, 2011. This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011, as set forth in Revenue Procedure 2010-51.

In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2011. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

“This year’s increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the recent increase in gas prices,” said IRS Commissioner Doug Shulman. “We are taking this step so the reimbursement rate will be fair to taxpayers.”

While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

The new six-month rate for computing deductible medical or moving expenses will also increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

The new rates are contained in Announcement 2011-40 on the optional standard mileage rates.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Mileage Rate Changes

Purpose

Rates 1/1 through 6/30/11 

  Rates 7/1 through 12/31/11 

Business

51

55.5

  Medical/Moving

19

23.5

Charitable

14

14

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