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Taxpayers who use their
automobiles for business or the production of
income can deduct their actual expenses for use
of an automobile (including the use of vans,
pickups, and panel trucks) that the taxpayer
owns or leases. Deductible expenses include
parking fees, tolls, taxes, depreciation,
repairs and maintenance, tires, gas, oil,
insurance and registration.
Standard rate for
business
Employees and self-employed individuals can use
the optional business standard mileage rate,
instead of tracking actual costs for
depreciation, repairs and maintenance, tires,
gas, insurance, oil and registration. Vehicle
costs based on the standard rate are determined
by multiplying the number of business miles
traveled during the year by the rate. In
addition to taking the standard rate, a taxpayer
can deduct certain other costs as separate
items, including as parking, tolls, interest on
the purchase of the automobile, and state and
local personal property taxes.
For 2014, the standard
mileage rate for business travel is 56 cents per
mile, a slight drop from the 2013 rate of 56.5
cents per mile. This allowance includes
depreciation of 22 cents per mile for 2014. A
taxpayer using the standard mileage rate must
reduce the basis of the vehicle by the
depreciation expenses included in the mileage
rate.
(While the use of actual
expenses may result in a greater deduction than
using the standard rate, this must be balanced
against the added recordkeeping and
substantiation burdens.)
Substantiation
and limitations
A taxpayer using the standard mileage rate does
not have to substantiate the expense amounts
covered by the rate. However, the taxpayer must
properly substantiate other travel elements,
such as time, place and purpose of the trip.
Travel expenses must be substantiated either by
adequate records or by sufficient evidence
corroborating the taxpayer's own statement. To
meet the adequate records requirement, a
taxpayer should maintain an account book, diary
or similar statement and documentary evidence to
establish each element of the expense.
A taxpayer cannot use the standard mileage rate
if it operates five or more vehicles at the same
time, if it claimed a Code Sec. 179 expensing
deduction for the vehicle, or if it claimed
depreciation other than straight-line
depreciation.
Other standard
mileage rates
The IRS also provides standard mileage rates for
medical and moving expenses. For 2014, the rate
is 23.5 cents per mile (down from 24 cents for
2013). The standard rate for charitable expenses
is set by statute and remains at 14 cents per
mile. The various standard mileage rates for
2014 apply to miles driven on or after January
1, 2014.
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