IRS Increases Mileage Deduction to 55.5 Cents per Mile
We know many of our readers run their own businesses. Here’s important news for small business owners, gunsmiths, and independent contractors. Effective July 1, 2011, the IRS has raised the mileage deduction for business-related travel from $0.51 to $0.555. The IRS made this unusual midyear change in response to the sharp rise in gas prices, which now exceed $4.00 per gallon. So, for business trips conducted between 7/1/2011 and 12/31/2011, you should deduct 55.5 cents per mile traveled. To qualify for this deduction, you need to keep detailed records of each trip (date, destination, purpose, mileage) and you must claim the mileage on your Schedule ‘C’ at tax time.
Effect on Employees: Even if you don’t file a Schedule ‘C’ (as a business owner), this change may affect you. USA Today explains that: “The [mileage deduction] rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage. Workers who receive the reimbursement don’t have to report it as income, as long as the payments don’t exceed the IRS benchmark.”
After initially saying it would not change the mileage deduction in mid-year, the IRS relented, announcing new rates on June 23, 2011, which are effective July 1st. The deductible business travel rate will rise to 55.5 cents a mile. That’s an increase of 4.5 cents from the 51 cent rate currently in effect. Also going up by 4.5 cents between July 1 and Dec. 31 of this year will be the mileage deduction for medical or moving expenses which were increased from 19 cents to 23.5 cents per mile.
TAX TIP: If you deduct business-related mileage we suggest you keep a little log-book in your vehicle. Write down the date of your trip and the starting mileage. When you reach your destination, write down the ending mileage. If it is a round-trip journey, you can log the end mileage when you return — but be sure to record your destination and a few notes to explain the purpose of the trip.
There are also expense reporting Apps for smartphones that allow you to record mileage. However, be sure to back up your digital deduction logs so that they don’t get lost if your phone goes haywire or if the battery dies.
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Tags: Deduction, IRS, Mileage, Schedule C, Taxes
