The Standard Mileage Rate
If you use the standard mileage rate (SMR) method, you calculate
the fixed and operating costs of your vehicle by multiplying the number
of business miles traveled during the
year by the business standard mileage rate. This rate is set by the
IRS and adjusted annually. For 2014, the standard mileage rates for
business miles was 56 cents per mile.
While very
simple to use, the SMR is not available to everyone. Specifically,
this rate may not be used to compute the deductible expenses for:
- four or more vehicles owned or leased by a taxpayer and used simultaneously,
as in fleet-type operations (this does not include situations where
you own more than one vehicle, such as a car and a truck, but you
don't use them at the same time; in that case, you can still use the
SMR);
- vehicles depreciated using any method other than straight line
(e.g., MACRS) or for which you claimed any special depreciation allowance
(e.g. bonus depreciation;)
- vehicles for which you claimed a section 179 deduction;
- vehicles that you lease if you have claimed actual car expenses;
- vehicles where you elected to use the actual cost method in the
first year the car was in service; and
- vehicles used by a rural mail carrier who received a qualified
reimbursement
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Tip The standard mileage rate can be used for
cars that you lease, not just those that you own, provided that you
used this method initially and continue to use this method for the
entire lease term. |
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If you want to use the standard mileage rate for a car,
you must use it in the very first year you place it in service for
your business. If you do that, in later years you can switch between
the actual cost method, and the standard
mileage rate, depending on which method yields the bigger deduction
in any given year. However, once you use the standard mileage rate,
you must use the straight-line method of
depreciation if you switch to the actual cost method.
Ordinarily,
straight-line gives you a smaller deduction than the quicker MACRS method of depreciation. The SMR and
MACRS are basically incompatible, and if you've ever used MACRS for
a car, you can never use the SMR method for that car.
What's
included in the SMR? Using the standard mileage rate takes
the place of deducting almost all of the operating and fixed business
costs of your vehicle, such as maintenance and repairs, tires, gas,
oil, insurance, and license and registration fees. However, you can
still deduct parking fees and tolls that are directly related to business
(i.e., not commuting) in addition to the SMR. For business owners,
interest on loans for vehicles and taxes attributable to the operation
of these vehicles are also deductible in addition to the SMR.
Depreciation
and the SMR. When you use the standard mileage rate method,
a specific amount is included for depreciation. This means that you
can't claim an additional deduction for depreciation when you use
the SMR. It also means that if you use the SMR, when you sell your
car and need to determine whether you had any taxable
gains, you must adjust the basis of your vehicle for each year
the method was used.
For each year the standard mileage rate
has been used, you must multiply your business mileage for the year
by the amount shown in the chart, and then reduce your car's tax basis
(and increase your potential taxable gains) by that amount.
Year Method Used |
Amount of Adjustment (Cents per Mile) |
1994-99 |
12 |
2000 |
14 |
2001-02 |
15 |
2003-2004 |
16 |
2005-2006 |
17 |
2007 |
19 |
2008-09 |
21 |
2010 |
23 |
2011 |
22 * |
2012 |
23 |
2013 |
23 |
2014 |
22 |
* Although the mileage rate was adjusted upwards
mid-year in 2011, the basis reduction adjustment amount was not changed.
It remained at 0.22 for all business miles driven in 2011. |
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Example In 2009, you bought a car for exclusive
use in your business. The car cost $22,500. From 2009 through 2014,
you used the standard mileage rate to figure your car expense deduction.
The miles driven in each year are shown below. The depreciation is
figured as follows.
Year |
Miles Driven |
Adjustment Amount |
Depreciation |
2009 |
15,100 |
0.21 |
$3,171 |
2010 |
14,900 |
0.23 |
$3,427 |
2011 |
15,500 |
0.22 * |
$3,410 |
2012 |
15,200 |
0.23 |
$3.496 |
2013 |
12,887 |
0.23 |
$2,964 |
2014 |
16,700 |
0.22 |
$3,674 |
Total |
$20,142 |
* Although the mileage rate was adjusted upwards
mid-year in 2011, the basis reduction adjustment amount was not changed.
It remains at 0.22 for all business miles driven in 2011. |
At the end of 2014, your adjusted basis in the car is
$2,358 ($22,500 - $20,142). |
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