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Tuesday, July 12, 2011

Business Tax Deduction Alert! The IRS has Increased the Standard Mileage Rates for 2011

The Internal Revenue Service (IRS) has announced an increase in the optional standard mileage rates for the final six months of 2011, in recognition of recent increases in gasoline prices. Taxpayers may use the optional standard rates to calculate http://www.blogger.com/img/blank.gifthe deductible costs of operating an automobile for business, medical, or moving expense purposes and for determining employee reimbursement.

Revised Standard Mileage Rates

The rate will increase to 55.5 cents a mile for all business miles driven from July 1, 2011, through Dec. 31, 2011. This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011.

The new six-month rate for computing deductible medical or moving expenses will also increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011.

The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

Effect of Increase in Standard Mileage Rates
The revised standard mileage rates apply to deductible transportation expenses paid or incurred for business, medical, or moving expense purposes on or after July 1, 2011, and to mileage allowances that are paid both:

To an employee on or after July 1, 2011, and

For transportation expenses paid or incurred by the employee on or after July 1, 2011.

The standard mileage rates set forth in Notice 2010-88 continue to apply to deductible transportation expenses paid or incurred for business, medical, or moving expense purposes before July 1, 2011, and to mileage allowances paid:

To an employee before July 1, 2011, or

With respect to transportation expenses paid or incurred by the employee before July
1, 2011.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Additional Information
You can read more about this change in IRS Announcement 2011-40.

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Small Business Reading Room

Business Tax Deduction Alert! The IRS has Increased the Standard Mileage Rates for 2011

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