The IRS recently announced that the mileage rate for business driving in 2014 will be 56¢ a mile, a slight decrease from the 2013 rate of 56.5¢ per mile. The rate can be used for cars, vans, pickups, and panel trucks.
Companies that don’t want to keep track of the actual costs of using a vehicle for business purposes may use this standard mileage rate instead. An annual study of the fixed and variable costs of operating an automobile is used to determine what the standard mileage rate will be for a given year.
In addition to the mileage rate, a separate deduction may be claimed for parking fees, tolls, interest relating to the purchase of the automobile, and state and local personal property taxes.
The standard business mileage rate can’t be used for automobiles used for hire (e.g., taxicabs) or for fleets of automobiles used simultaneously by the taxpayer. Nor can the standard rate be used if the vehicle was previously depreciated by other than the straight-line method, including using bonus depreciation or the Section 179 deduction.
When the business mileage rate is used in 2014, depreciation will be considered to have been allowed at a rate of 22¢ a mile. This depreciation reduces the taxpayer’s cost basis in the vehicle.
Call us if you need any assistance in this area.
Written by: Doug Rodrigues