The IRS has released the optional standard mileage rates to use for 2005 in computing the deductible costs of operating an automobile for business, charitable, medical or moving expense purposes. Beginning January 1, 2005, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:

• 40½ cents a mile for all business miles driven, up from 37½ cents a mile in 2004
  
  
• 15 cents a mile when computing deductible medical or moving expenses, up from 14 cents a mile in 2004
  
  
• 14 cents a mile when giving services to a charitable organization.

The 3-cent increase in the business mileage rate is the largest one-year rise ever. The primary reasons were higher prices for vehicles and fuel during the year ending in September. The charitable standard mileage rate is set by law.

The IRS has also published a revised Procedure to help employees, self-employed individuals, or other taxpayers to compute the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes.

The Procedure also provides rules under which the amount of ordinary and necessary expenses of local travel or transportation away from home that are paid or incurred by an employee will be deemed substantiated if a payor (the employer, its agent, or a third party) provides a mileage allowance under a reimbursement or other expense allowance arrangement to pay for the expenses.

Use of a method of substantiation described in this Procedure is not mandatory and a taxpayer may use actual allowable expenses if the taxpayer maintains adequate records or other sufficient evidence for proper substantiation.

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...back to 18 November 2004


Further information:
www.irs.gov/newsroom/article/0,,id=131232,00.html
www.irs.gov/pub/irs-drop/rp-04-64.pdf