In July taxes may be the furthest thing from your mind. In 10 Important Tasks for Your Mid Year Checkup [1] I reminded everyone to assess their tax situation. Here’s a tax question that came up recently. With sky high [2] gas [3] prices [4], it could be a situation that affects many of you.
Using Your Personal Car for Work
A reader, Kyle, accepted a new job last month. The company requires that Kyle use his personal car for work:
Typically I am driving 200 miles a day and I am reimbursed by the gas price divided by 30 cents per mile plus $400 a month (roughly 23 cents a mile). I see that the IRS acknowledges about 50 cents per mile as cost. Is the roughly 27 cents per mile tax deductible for me next year? – Kyle
IRS Mileage Rates
Mileage Rate Increase in 2008. The first thing Kyle should know is that the IRS raised the mileage rate as of July 1 [5] for the remainder of 2008. The first six months of 2008 will be at 50.5 cents per mile and the last six months of 2008 will be at a 58.5 cents per mile. For anyone computing business mileage, you will need to make two computations – one for each part of the year.
Update: Here are the updated standard business IRS mileage rates for each year since I answered this question:
- IRS mileage rate 2009: 55 cents per mile.
- IRS mileage rate 2010: 50 cents per mile.
- IRS mileage rate 2011: 51 cents per mile through June 30, then 55.5 cents per mile.
- IRS mileage rate 2012: 55.5 cents per mile.
- IRS mileage rate 2013: 56.5 cents per mile.
- IRS mileage rate 2014: 56 cents per mile.
- IRS mileage rate 2015: 57.5 cents per mile.
- IRS mileage rate 2016: 54 cents per mile.
- IRS mileage rate 2017: 53.5 cents per mile.
Deducting Employee Business Mileage
Yes, Kyle can deduct the unreimbursed portion of business mileage (approximately 27 cents per mile in Kyle’s case before the increase). Because Kyle is an employee, the mileage is classified as an employee business expense.
The deductible mileage is only for business travel and does not include commuting miles (from home to your main place of business and return).
How to Report Employee Mileage on Your Taxes
Unfortunately, Kyle can only deduct the mileage if he is itemizing his deductions [6]. If he takes the standard deduction [7], he’s out of luck. In addition, because employee mileage is a miscellaneous itemized deduction, the deduction is only for any amount above 2% of AGI [8].
If Kyle plans to itemize and he passes the 2% floor, he can use Form 2106 [9] to calculate the deduction as follows:
Compute the number of business miles multiplied by the IRS standard mileage allowed amount. Subtract the reimbursement you have received from your employer. The remaining amount will carry forward to Line 21 on Schedule A [10].
You can take your mileage tax deduction when you file online using TurboTax [11].