The IRS today acknowledged what you and I have known for months -- it costs more to buy a car and keep the tank full these days. To help you recoup some of those costs, the IRS raised the standard mileage rate used to calculate certain tax deductions.
Beginning next year, you can deduct $0.485 for every mile driven for business, and $0.20 for each mile driven for medical purposes or moving. That's a $0.04 increase in the business rate, and a $0.02 increase in the medical and moving rate.
If you use your car for volunteer work or some other charitable purpose, you can deduct $0.14 per mile. That rate lags the others because Congress sets the reimbursement by law, and the IRS cannot increase it to keep pace with the rising costs of operating a vehicle.
An extra $0.04 might not seem like a big deal, but every little bit adds up when you're using your own car for work without getting reimbursed by the company. It's also good news for many employees who do get reimbursed; many companies match their reimbursement rate to that of the IRS.
Don't think it's worth it to track your miles for a couple of measly cents? Let's say you're self-employed, or you're an employee whose mileage does not get reimbursed by the company. If you drive 100 miles a week for work, that adds up to 5,200 miles in a year. That's a $2,500 deduction you'll be tossing aside if you don't keep track of your mileage and claim this little tax goodie.
The dollars can add up for volunteer work, too. Let's say you drive 30 miles a week to deliver food to homebound people. That means you've driven 1,560 miles in a year, making you eligible for a $218 tax deduction.
That's not a huge pile of money, but it's probably worth a couple tanks of gas. It's the small change that adds up to big savings. Besides, you could do something better with that cash, like angling for your piece of high gas prices by buying stock in energy companies like BP
Unfortunately, regular commuting expenses aren't deductible. But driving between business locations, visiting customers, or traveling to distant business meetings can generate deductible expenses. To compute your deduction, you can either add up your actual expenses, or use these standard amounts. You may also be able to write off business-related parking fees and tolls.
To qualify for the deduction, you'll have to document your expenses. To claim these standard rates, you must keep a log showing the miles traveled, your destination and the business purpose. It may be a little work, but it's worth at least a couple bucks.
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