Standard Mileage Rates
The standard mileage rates enable a taxpayer to use a vehicle for specified purposes to deduct vehicle expenses on a per-mile basis rather than deducting actual car expenses incurred during the year. The rates vary, depending on the purpose of the transportation.
Accordingly, the standard mileage rates differ from one another depending on whether the vehicle is used for business, charitable purposes, obtaining medical care, or relocating for employment.
Taxpayers must keep accurate records when it comes to deducting these uses of their personal vehicles in the form of mileage and or receipts for actual expenses.
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Business Use of a Taxpayer’s Personal Vehicle
A taxpayer may deduct unreimbursed employee expenses, including unreimbursed expenses related to business use of a personal vehicle, as “miscellaneous itemized deductions” to the extent the total of such expenses exceeds 2% of his or her adjusted gross income. For the expenses to be deductible, however, they must meet certain criteria. Thus, for expenses in connection with a vehicle’s business use to be deductible, such expenses must have been paid or incurred during the tax year for the ordinary and necessary purpose of carrying on the taxpayer’s trade or business as an employee, provided the paid or incurred personal vehicle expenses meeting these three criteria are not reimbursed. The deductible personal vehicle expenses include traveling:
1. Between workplaces;
2. To meet with a business customer;
3. To attend a business meeting located away from the taxpayer’s regular workplace; or from the taxpayer’s home to a temporary workplace.
The 2015 standard mileage rate applicable to deduction of eligible personal vehicle expenses incurred while the vehicle is being used in an employer’s business is 57.5¢ per mile. In addition to using the standard mileage rate, a taxpayer may also deduct any business-related parking fees and tolls paid while engaging in deductible business travel. However, a taxpayer’s parking fees for parking his or her vehicle at the usual business place are considered commuting 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 expenses, such as the cost of gas and oil, directly related to using a personal vehicle in providing services to a charitable organization. Alternatively, a taxpayer may use the standard mileage rate applicable to a personal vehicle for charitable purposes. For 2015, the standard mileage rate for a taxpayer’s personal vehicle use for charitable purposes is 14¢ per mile.
As in other mileage deductions, the taxpayer may also deduct parking fees and tolls regardless of whether the actual expenses or standard mileage rate is used.
A related issue involves a taxpayer’s travel expenses incurred in providing services to a charity. Thus, also, a taxpayer may generally claim a charitable contribution deduction for travel expenses necessarily incurred. In contrast, away from home performing services for a charitable organization, there is no significant personal pleasure, recreation, or vacation in the travel. The taxpayer must be on duty in a genuine and substantial sense throughout the trip.
Personal Vehicle to Obtain Medical Care
A taxpayer may also deduct medical and dental expenses to the extent the total of such expenses exceed 10% of adjusted gross income for taxpayers younger than age 65 or 7.5% for taxpayers age 65 and older. The threshold for taxpayers age 65 or older remains at 7.5% through 2016, but beginning in 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.
The vehicle expenses 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 needing medical care;
2. By a nurse or other person who can administer injections, medications, or other treatment required by a patient traveling to obtain medical care and unable to travel alone.
3. For regular visits to see a mentally-ill dependent if such visits are recommended as a part of the mentally ill dependent’s treatment.
A taxpayer who uses a personal vehicle for such medical reasons is permitted to include the out-of-pocket vehicle expenses incurred the expenses for gas and oil, for example, or deduct medical travel expenses at the standard medical mileage rate. For 2015, the standard medical mileage rate is 23¢ per mile. The taxpayer may also deduct any parking fees or tolls, regardless of whether the actual expense or the standard mileage rate is used.
Use of a Taxpayer’s Personal Vehicle to Move
Many taxpayers change their residence each year, and many of those taxpayer relocations involve new jobs that can permit a taxpayer to deduct moving expenses by car. Thus, certain moving expenses incurred within one year of the date a taxpayer first reported to work at a new main job location, provided the new location is at least 50 miles farther from the taxpayer’s former home than the former main job location, may be deducted as an adjustment to gross income. The deductible moving expenses include traveling to a new home, including transportation and lodging en route.
A taxpayer who uses his or her 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 deduction of moving expenses. In addition to any parking fees and tolls paid, the taxpayer can deduct the actual vehicle expenses incurred, such as the expenses for gas and oil or the standard mileage rate.