Standard mileage rates
Standard mileage rates allow a taxpayer using a special purpose vehicle to deduct vehicle expenses per mile instead of deducting actual automobile expenses incurred during the year. Rates vary, depending on the purpose of transportation.
Consequently, standard mileage rates differ from one another depending on whether the vehicle is used for business, charity, medical care, or relocation for work purposes.
It is very important that taxpayers keep accurate records when it comes to deducting these uses of their personal vehicles in the form of mileage or receipts for actual expenses.
Business use of a taxpayer’s personal vehicle
A taxpayer may deduct unreimbursed employee expenses, including unreimbursed expenses related to the business use of a personal vehicle as “miscellaneous itemized deductions” to the extent that the total of such expenses exceeds 2% of their income. adjusted gross. However, for expenses to be deductible, they must meet certain criteria. Therefore, for expenses related to the commercial use of a vehicle to be deductible, said expenses must have been paid or incurred during the tax year for the ordinary and necessary purpose of carrying out the taxpayer’s trade or business as an employee, provided it has been paid or incurred. Personal vehicle expenses that meet these three criteria are not reimbursed. Deductible personal vehicle expenses include travel:
1. Between workplaces;
2. To meet with a business client;
3. Attend a business meeting located outside of the taxpayer’s usual workplace; or from the taxpayer’s domicile to a temporary workplace.
The 2015 standard mileage rate applicable to the deduction of eligible personal vehicle expenses incurred while the vehicle is used in an employer’s business is 57.5 ¢ per mile. In addition to using the standard mileage rate, a taxpayer can also deduct parking fees and business-related tolls paid while taking deductible business trips. However, the parking fees that a taxpayer pays to park their vehicle at their normal workplace are considered travel expenses and are not deductible.
Use of a personal vehicle for charitable purposes
A taxpayer may deduct as a charitable contribution any unreimbursed out-of-pocket expense, such as the cost of fuel and oil, directly related to the use of a personal vehicle to provide services to a charitable organization. Alternatively, a taxpayer may use the standard mileage rate applicable to the use of a personal vehicle for charitable purposes. For 2015, the standard mileage rate for the use of a personal vehicle by a taxpayer for charitable purposes is 14 ¢ per mile.
As with other mileage deductions, the taxpayer can also deduct parking fees and tolls, regardless of whether actual expenses or the standard mileage rate are used.
A related issue involves a taxpayer’s travel expenses incurred while providing services to a charity. Therefore, in addition, a taxpayer can generally claim a charitable contribution deduction for travel expenses necessarily incurred for pleasure while away from home performing services for a charitable organization as long as there is no significant element of personal recreation or vacation in the trip, and the taxpayer must be on duty in a genuine and substantial sense throughout the trip.
Personal vehicle to obtain medical attention
A taxpayer may also deduct medical and dental expenses to the extent that the total of such expenses exceeds 10% of adjusted gross income for taxpayers under 65 or 7.5% for taxpayers 65 and older. The threshold for taxpayers aged 65 and over remains at 7.5% until 2016, but as of 2017, medical and dental expenses will be deductible, regardless of the taxpayer’s age, only if they exceed 10% of the taxpayer’s adjusted gross income. .
Vehicle expenses that a taxpayer may include as medical and dental expenses are the amounts paid for transportation to obtain medical care for the taxpayer, a spouse, or a dependent. A taxpayer may also include as medical and dental expenses those transportation costs incurred:
1. By a parent who must accompany a child in need of medical attention;
2. By a nurse or other person who can administer injections, medications, or other treatment required by a patient traveling for medical care and cannot travel alone.
3. For regular visits to see a dependent with mental illness, if such visits are recommended as part of the treatment of the dependent with mental illness.
A taxpayer using a personal vehicle for such medical reasons can include the vehicle’s out-of-pocket expenses incurred for gas and oil expenses, for example, or deduct medical travel expenses from the standard medical mileage rate. For 2015, the standard medical mileage rate is 23 ¢ per mile. The taxpayer can also deduct any parking or toll fees, regardless of whether the actual expense or the standard mileage rate is used.
Use of a taxpayer’s personal vehicle to get around
Many taxpayers change residences each year, and many of those taxpayer relocations involve new jobs that may allow the taxpayer to deduct moving expenses by car. Therefore, certain moving expenses incurred within one year from the date a taxpayer first reported to work at a new primary work location, provided the new location is at least 50 miles further from the taxpayer’s former home than the former primary work location can be deducted as an adjustment to gross income. Deductible moving expenses include travel expenses to a new home, including transportation and lodging en route.
A taxpayer who uses his personal vehicle to transport the taxpayer, members of the taxpayer’s household, or the taxpayer’s personal effects to a new home may deduct such costs, provided the move is eligible for the moving expense deduction. In addition to the parking fees and tolls paid, the taxpayer can deduct the actual vehicle expenses incurred, such as gas and oil expenses or the standard mileage rate.
The 2015 standard mileage rate applicable to moving expenses is 23 ¢ per mile.
