It's Never Too Late

Just because 2009 is already underway it's not too late to start recording your business mileage.

When preparing your taxes for the year you can estimate the percentage of business use for a vehicle based on the actual miles that you record. The more miles that you record, the more credibility your estimated miles will have with the IRS.

One more thought - even though gas prices have recently fallen, there are still big bucks to save by claiming the business use of your vehicle(s). A friend of mine began tracking mileage for the first time in 2008 (he had operated a business for over 12 years without claiming business use miles). Now he won't get in his car without jotting down the simple notes required by the IRS.

New Mileage Rate for 2009 Announced

The IRS has issued Revenue Procedure 2008-72 announcing the 2009 standard mileage rates. The optional standard mileage rate for business miles will be 55 cents per mile beginning January 1, 2009. The depreciation component of the standard mileage rate is 21 cents per mile.

Track Your Mileage in 2009

Now is the time to plan an important part of your tax strategy for 2009. Tracking mileage for business purposes, charitable contributions and medical visits can save you hundreds of dollars in taxes.

It amazes me when I speak to small business owners who do not track their mileage. Your company does not have to be a full-time venture in order to deduct the vehicle expenses associated with with your business activities. Trips to the post office, the office supply store and any number of business actions requiring the use of your automobile are legal deductions.

Our sponsor, MileageBooks.com, makes an excellent auto mileage log for tracking your trips. You'll need documentation so make sure to use this product or some sort of form that shows the date, destination and purpose of your trips along with beginning and ending odometer readings.

Prediction on Mileage Rates

With oil prices dropping below $90 per barrel the smart money is being bet on no action being taken to increase the standard mileage rate for this year.

Congress has forgotten the issue and the relief at the gas pump has reduced consumer anger over fuel prices. I guess that our elected officials only react to "emergencies" - not good policy initiatives. I also suppose that Americans have too short of an attention span to stay on an issue, especially when new and bigger problems arise.

We will anxiously wait to see what the rate is set at for 2009.

Mileage Rate Still Unchanged

Many of you have written to let me know that you have contacted your senators and or house representative. Thus far none of the legislation introduced has gotten out of committee.

Keep up the good work. As the election nears those running for election will be tuned into the demands of their constituents. In the meantime, don't let the recent relief at the pump curb your enthusiasm for the standard mileage rate increase as it is proposed in several house and senate bills.

House Bills Propose Increased Mileage Rates

A plethora of bills have been introduced in the U.S. House of Representatives designed to use the standard mileage deductions to offset the high cost of fuel. While the I.R.S. has increased the rate by administrative action beginning on July 1, the increase to 58.5 cents does not reflect the actual cost of increased gasoline prices on businesses.

We continue to urge passage of U.S. Senate Bill s.3032 which would raise the rate to 70 cents per mile. Following are some of the bills being considered in the House:

H.R.6165, introduced by Rep. Edward Whitfield, would allow commuters to deduct mileage based on the current standard mileage rate. The idea is to give all Americans a tax break due to rising fuel costs.

Meanwhile, H.R.2020, Introduced by Rep. Todd Platts, would permanently raise the rate for mileage incurred for charity purposes. The current rate of 14 cents per mile has not changed for several years.

Also in the works is H.R.6263, introduced by Rep. John Lewis, which comprehensively looks at all of the mileage rates that have been traditionally deducted. This bill seems to more closely mirror the Senate version which we support.

Contact your Senators and Representative to urge passage of a significantly increased standard mileage rate.

New 2008 Standard Mileage Rate

This was announced by the IRS today:

This announcement informs taxpayers that the Internal Revenue Service is modifying Rev. Proc. 2007-70, 2007-50 I.R.B. 1162, by revising the optional standard mileage rates for computing the deductible costs of operating an automobile for business, medical, or moving expense purposes and for determining the reimbursed amount of these expenses that is deemed substantiated. This modification results from recent increases in the price of fuel.

The revised standard mileage rates are:
(1) Business 58.5 cents per mile
(2) Medical and moving 27 cents per mile

The mileage rate that applies to the deduction for charitable contributions is fixed under § 170(i) of the Internal Revenue Code at 14 cents per mile. The revised standard mileage rates set forth in this announcement apply to deductible transportation expenses paid or incurred for business, medical, or moving expense purposes on or after July 1, 2008, and to mileage allowances that are paid both (1) to an employee on or after July 1, 2008, and (2) with respect to transportation expenses paid or incurred by the employee on or after July 1, 2008.

The standard mileage rates set forth in Rev. Proc. 2007-70 continue to apply to deductible transportation expenses paid or incurred for business, medical, or moving expense purposes before July 1, 2008, and to mileage allowances paid (1) to an employee before July 1, 2008, or (2) with respect to transportation expenses paid or incurred by the employee before July 1, 2008. All other provisions of Rev. Proc. 2007-70 remain in effect.

Though any relief is welcome, TaxMiles does not believe that this change is reflective of the actual costs and that Congress needs to continue to look at raising rates further. Not only is the rate not high enough, it is not retroactive as would be Senate Bill s.3032.

We still urge you to contact your U.S. Senator to have the rate raised further.

Senate Bill Proposes Increase in Standard Mileage Rate

Sen. Charles Schumer (D, NY) is once again coming to the aid of small business owners by introducing Senate Bill s.3032 which would increase the standard mileage rate for all of 2008 to 70 cents per mile.

The bill has a proposed act title of "Reimbursing Our American Drivers (ROAD) Act of 2008" and would also raise the rate for charitable miles from 14 to 40 cents per mile.

Taxmiles urges all readers of this blog to contact their U.S. senators to urge passage of this bill which will have a strong benefit to the economy and help keep prices for all goods and services lower. You can find the senator from your state at this web site.

Change never happens in Washington, D.C. unless citizens demand it.

Saving Money on Gasoline

One way to reduce the cost of operating a business vehicle or to decrease fuel expenditures for a fleet is to shop for the best available prices. Gasoline prices at filling stations can vary widely so it pays to know which operators are offering the best deal.

There are web sites that will give you the lastest retail prices at filling stations near your business or home. At GasBuddy.com you can search prices by state, city and even zip code. In my zip code area, for example, the price of gasoline varied from $3.89 to $3.64 per gallon of regular unleaded. Believe it or not, COSCO was not the cheapest price listed.

Of course, it is important to be sure of the quality of gasoline. Some off brands may not provide sufficient octane or may not offer helpful additives. But researching prices can reduce your operating expenses and the internet is an easy way to find the best deals.

Speaking of COSCO, your local branch store may offer one of the lowest available prices. In our case, we use our COSCO issued AMEX card to get an additional 5% discount. At COSCO's current price and including the additional discount, I just paid $3.47 per gallon. With most local filling stations charging about $3.75, and our monthly consumption at 140 gallons, we are saving nearly $40 per month on fuel.

Standard Mileage Deduction Advantages

The age of a car may impact whether or not you utilize the Standard Mileage Deduction or some other method for expensing your business vehicle usage. An older car may realize greater tax benefit from the Standard Mileage Deduction if one or more of the following apply:

1. Its value has diminished and depreciation would be a minimal part of the expenses to be deducted,
2. The vehicle is paid for and no interest is being applied against it that could be deducted,
3. Cost of repairs and maintenance is minimal.

To determine if the Standard Mileage Rate is more beneficial, simply multiply the number of business miles by the current IRS allowance and compare that amount to the cost of operation multiplied by the percent of business usage.

There is one major factor to consider - you may not switch back and forth between expensing methods. Once you select the expensing method, you must continue to determine your deductions using that formula until disposition of the vehicle.

For more information on requisites and exceptions visit the IRS explanation page .