The mileage rate is the rate at which small businesses and self-employed persons can deduct expenses on each mile driven for charitable, business, and medical or moving purposes. You can either deduct the actual expenses incurred on using a vehicle or use the standard mileage rate to calculate the amount to be deducted. Taxpayers mostly use the standard mileage rates, as it makes calculation simpler.
The IRS determines the standard mileage rate (SMR) based on information from Runzheimer International, a company that helps organizations to monitor efficiency and productivity for mobile employees. Based on information from an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil; the IRS establishes the standard mileage rates.
The rate for medical and moving purposes is based on variable costs, such as gas and oil. The charitable rate is set by law.
For 2015, the standard mileage rates for the use of a car, van, pickup or panel truck are:
- 57.5 cents per mile for business miles driven, up from 56 cents in 2014
- 23 cents per mile driven for medical or moving purposes, down half a cent from 2014, and
- 14 cents per mile driven in service of charitable organizations.
The standard mileage rate has the vehicle depreciation included, so you cannot claim it additionally on your return with the SMR.
You should keep a mileage log to determine the distance a vehicle covered. Every time you use a vehicle for business, charitable, or medical or moving purposes, record the distance travelled for record-keeping. Without accurate and sufficient records, you will not be able to take the full benefit of the deduction. It is important to keep accurate records, as the IRS charges a penalty for erroneous deductions.
To calculate your business mileage tax deduction, multiply the total business mileage by the standard mileage rate set by the IRS for the year. You may refer to this IRS bulletin for more details.