The 2014 standard business driving mileage rate is 56 cents per mile. The IRS adjusted that from the 56.5 cents per mile in 2013.
If a business has four or fewer vehicles, it is OK to use the mileage rate instead of actual expenses. However, each vehicle’s tax basis (cost) is to be reduced by the depreciation component — 22 cents per mile. That will be important when the vehicle is sold.
The mileage rate for medical travel and for moving expenses for 2014 is 22 cents per mile. That is reduced from the 2013 rate of 23 cents per mile.
The driving on charitable activities is 14 cents per mile in 2014 and 2013.
If the mileage rate is used to figure driving expenses, the cost of parking (and tolls) can be an additional expense.
But the mileage rate might be less than actual expenses; it is best to look at it both ways.
If you claimed depreciation expense on the vehicle in prior years, you should not use the mileage rates.
Actual expenses are first based on the ratio of business miles driven divided by total miles driven in the year. That ratio is then applied to the actual expenses for fuel, maintenance and repairs, tires, insurance, licenses, depreciation and other vehicle expenses. If the vehicle is fairly new and/or expensive, actual expenses may give a larger tax deduction than the business mileage rate method.
If you did not record the odometer reading at Jan. 1, 2013, look at the receipts for lubrication, tires, etc., to do a reasonable estimate of total miles driven in the year.
The standard mileage rate is a simplified method available to employees and self-employed business owners.
Be sure to save the vehicle records. The main item is some sort of record of business driving. Some folks use a calendar and record total miles driven each month and the business miles driven that month. Then they just total the 12 months’ information to figure the deduction. Noting how and why the driving was for business is important.
If you have an office in your home, then business driving includes driving from that location.
Did you hear? “Doing what you like is freedom; liking what you do is happiness.”
John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Co. CPAs.