Tax season can be a real headache for everyone. A good understanding of some of the most common tax deductions is important as to insure that you are taking advantage of every option on the table and not paying more tax than you are required to.
One very common tax deduction used by many self-employed individuals, volunteers, etc. is the mileage tax deduction. There are certain instances in which the IRS allows taxpayers to claim deductions for the miles they put on their vehicle for business, medical, moving, or volunteering services to a charity.
The first important thing to note is that in order to claim mileage a taxpayer will need to itemize their deductions rather than take the standard IRS deduction. Second a clear understanding of the current IRS deduction is necessary to calculate the deduction one is entitled to.
Calculating your mileage deduction
To calculate your mileage rate you simply must multiply the number of miles driven by the mileage rate set forth by the IRS for a specific purpose such as business use.
From time to time the IRS increases the mileage rate based on studies of the cost to operate a car or van. At the beginning of 2011 the rate set by the IRS for business use was $0.51 per mile and later upped in the middle of that year to $0.555 per mile. This rate is the amount taxpayers will use to calculate their 2012 tax returns.
Rate increase in 2013
However starting in 2013, the IRS has once again increased this rate to $0.565. A small increase, but a little relief for those struggling with surging fuel prices none the less.
The mileage tax deduction rate a taxpayer can claim for other purposes are different from business use. The 2012 standard mileage rate for medical or moving purposes is $0.23 cents per mile. If using a vehicle in the service of a charitable organization the rate is $0.14 per mile.
All of which are calculated the same way one would calculate the business mileage deduction. Simply multiply the number of miles by the rate set by the IRS. The rate for moving and medical purposes will also increase for 2013 by $0.01 to $0.24 per mile.
If you are someone who uses their vehicle frequently for business purposes, if you volunteer services to a charitable organization, or if you put a lot of miles on your vehicle while moving or going to medical appointments then it is very important you keep records. If you are ever audited by the IRS, they will want to see these, and even if you don’t it is much safer than just guessing.
Tax software such as TurboTax can help you claim your deduction for mileage. In a simple interview style you will discover all of the credits and deductions you are eligible to claim.
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