Lowrance Law, LLC

The IRS has spoken. It has has no current plans to increase the standard mileage rate of 51¢ per mile for business miles driven, despite the big boost in gasoline prices.

Simplified deduction method. The optional mileage allowance for owned or leased autos (including vans, pickups or panel trucks) is 51¢ per mile for business travel after 2010. (The 2011 rate for using a car to get medical care or in connection with a move that qualifies for the moving expense deduction is 19¢ per mile, 2.5¢ more per mile than the 16.5¢ for 2010.) ( Rev Proc 2010-51, 2010-51 IRB 883 )

The mileage allowance deduction replaces separate deductions for lease payments (or depreciation if the car is purchased), maintenance, repairs, tires, gas, oil, insurance, and license and registration fees. The taxpayer may, however, still claim separate deductions for parking fees and tolls connected to business driving. ( Rev Proc 2010-51 )

The standard mileage rate may not be used for a purchased auto if: it was previously depreciated using a method other than straight-line for its estimated useful life; a Code Sec. 179 expensing deduction was claimed for the auto; the taxpayer has claimed the additional first-year depreciation allowance; or the taxpayer depreciated it using MACRS under Code Sec. 168.

A taxpayer who uses the mileage allowance method for an auto he owns may switch in a later year to deducting the business connected portion of actual expenses, so long as he depreciates it from that point on using straight-line depreciation over the auto’s remaining life. The depreciation deductions would still be subject to the Code Sec. 280F dollar caps. ( Rev Proc 2010-51 )

Additionally, employers may reimburse employees who are required to provide their own cars for business use at a rate that doesn’t exceed the standard mileage rate. A mileage rate that doesn’t exceed the standard mileage rate is treated as made under an accountable plan if the mileage is properly substantiated (time, place, mileage, and business purpose).

I handle IRS problems for my clients. If you get a letter from the IRS, and you are worried or have questions, send me an e-mail or, if urgent, call me.

Bill Lowrance
Lowrance Law LLC
McLean, VA