Do you or your employees use vehicles for business purposes? If so, you’ll want to keep up to date on the new rates the IRS just released for 2014. You’ll need this information to calculate the deductible costs of using a vehicle for business, charitable, medical or moving purposes.

Effective January 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 56 cents per mile for business miles driven (previously  56.5 cents per mile in 2013)
• 23.5 cents per mile driven for medical or moving purposes (previously  24 cents per mile in 2013)
• 14 cents per mile driven in service of charitable organizations

There are a few limitations on using these rates. According to the IRS: “A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.  In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.”

If you have questions, be sure to review the requirements listed in Rev. Proc. 2010-51. Notice 2013-80 is the basic outline issued by the IRS; this document contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

Instead of using the mileage rates, you also have the option of calculating the actual cost of operating your automobile, but this can be tedious and involve a lot of calculations. Do be aware that the IRS is a bit picky about documentation. But if you keep great records and are good with math, you can calculate the actual expense by first finding the percentage of business miles you drove out of the total miles you’ve driven. So, for example, if you drove 20,000 miles total, and 1200 of those miles were documented business miles, your business-use percentage would be 6% (1200 divided by 20,000). You would then use that percentage to calculate costs based on expenses such as: depreciation, gas/oil, maintenance/repairs, tires, registration fees, taxes, licenses, vehicle loan interest, insurance, rental or lease payments, garage rent, and tolls/parking fees. Notice 2013-80 limits the portion of the business standard mileage rate treated as depreciation to 23 cents per mile for 2010, 22 cents per mile for 2011, 23 cents per mile for 2012, 23 cents per mile for 2013, and 22 cents per mile for 2014.

Still have questions? Let us know, we’re here to help!