The IRS increased the business standard mileage rate from 50.5 cents per mile to 58.8 cents per mile effective July 1, 2008. They also raised the standard mileage rate for medical mileage from 19 cents-per-mile to 27 cents-per-mile. Charitable mileage rates remains fixed by law at 14 cents per mile.
The standard mileage rate for business use of vehicles is used to calculate the business deduction in lieu of actual costs of operating a vehicle. The standard mileage deduction covers all costs of operating the vehicle excepts for interest expense and personal property taxes.
Many people don’t realize the mileage rate includes a factor to cover depreciation expense. Depreciation using the standard mileage rate was 16 cents per mile in 2003 and 2004; 17 cents per mile for 2005 and 2006; 19 cents per mile for 2007; and 21 cents per mile for 2008.
The standard mileage rate cannot be used to compute the deductible business expenses of operating an automobile or truck if the business operates five or more automobiles or trucks at the same time. You cannot use standard mileage rates if you have ever used a depreciation method other than straight-line depreciation to compute you vehicle operating costs. For practical purposes, if you start deducting you automobile’s business deduction using actual costs then you can’t switch to standard mileage rates. However, if you start computing your automobile’s business deduction using standard mileage, you can switch to actual costs as long as depreciation is computed using the straight-line method of depreciation.
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