The IRS announced that the standard mileage rate will increase to 51 cents per business mile driven in 2011. That is a jump of just 2% from the 50 cents allowed in 2010.
When you use your car for business, driving between job sites is deductible. So is driving between your home and a temporary job site, job interviews, and conferences. Commuting between your home and a regular place of business generally isn’t tax deductible.
There are two ways for you to calculate your automobile expenses. You can either claim $.50 per business mile driven in 2010 (increasing to $.51 for 2011), or you can base your deduction on the percentage of miles your car is driven for business multiplied by the actual costs incurred during the year. Allowable costs include gas, insurance, repairs, parking at home, and either your lease payments, or if you own your car, a factor for depreciation.
Generally, unless you drive your car relatively few miles each year, with most of those miles being allowable business miles, you’re better off basing your deduction on the standard mileage rate.
How to Claim The Deduction
Taxpayers who are compensated as employees generally will claim their deductible automobile expenses as an unreimbursed employee business expense. These type expenses are reported on a Form 2106 and are deducted as a miscellaneous itemized deduction on the Schedule A. Keep in mind that miscellaneous itemized deductions are only allowable to the extent they exceed 2% of your income, and are not allowable when calculating the Alternative Minimum Tax (AMT).
Those taxpayers compensated as independent contractors will generally claim their allowable automobile expenses directly against their self-employment income on a Schedule C, Profit or Loss from Business.
Other Deductible Miles
The use of an automobile in connection with a charitable activity is deductible at a rate of 14 cents per mile for 2010 and 2011 and should be reported with other charitable contributions as an itemized deduction of the Schedule A.
Any mileage driven in connection with a qualified move is deductible at a rate of 16.5 cents per mile in 2010, increasing to 19 cents per mile in 2011, and should be reported on a Form 3903, Moving Expenses.
And don’t forget that medical related mileage is also deductible. Medical mileage is allowable at 16.5 cents per mile in 2010, and then jumps to 19 cents per mile in 2011, and should be reported with all other medical expenses on the Schedule A.