Taxpayers may choose to deduct business automobile expenses using the actual operating expenses of an automobile plus depreciation, or they can use the “optional standard mileage rate” to compute business auto deductions for owned vehicles. If the taxpayer chooses the actual method, which includes MACRS depreciation, in the first business-use year, then the optional method may not be used in any future year. Thus, a taxpayer is unable to switch back to the standard mileage rate in any subsequent year for that vehicle.
On the other hand, if a taxpayer elects the optional standard mileage rate in the first year of business use, then he or she can switch back and forth between the two methods in subsequent years. However, the taxpayer is limited to MACRS straight-line depreciation in years they opt for the actual method.
2013 Standard Mileage Rates:
- The standard mileage rate for business transportation or travel expenses is 56.5 cents per mile (up from 55.5 cents in 2012). For automobiles a taxpayer uses for business purposes, the portion of the business standard mileage rate treated as depreciation is 23 cents per mile for 2013, the same as in 2012.
- The IRS also publishes a standard mileage rate for the use of a vehicle for medical or moving purposes. For 2013, that rate is 24 cents per mile (up from 23 cents per mile in 2012).
- The standard mileage rate is 14 cents per mile for use of an automobile in rendering gratuitous services to a charitable organization. This amount is statutory and not subject to annual adjustments and has been 14 cents per mile for several years.
Other issues related to using the standard mileage rate:
- Motorcycles – The IRS has never established an optional mileage rate for motorcycles; thus, the actual expenses method must be used. In 2009, the Office of Chief Counsel issued an information letter related to this subject and indicated that no standard mileage rate is available for motorcycles. Therefore, the actual expense method must be used for motorcycles.
- Leased vehicles – The mileage method is acceptable for leased cars.
- Multiple vehicles – Whether the taxpayer is an owner or lessee, the mileage allowance method can’t be used to claim business auto deductions for vehicles used for hire or for fleet operations. Fleet operations are defined as 5 or more vehicles used simultaneously. Thus, taxpayers who use no more than four vehicles at the same time for business purposes may use the standard mileage rate.
If you have questions related to the standard mileage rates or deducting the use of an automobile for business, medical, moving, or charity, please give our office a call.