Tax Tip from the week of November 21, 2005
Each year the IRS publishes a standard mileage reimbursement rate. This is the amount you can claim for each mile you drive for business purposes. There’s another reimbursement rate if you use your car for charitable activities. A third rate may apply when you drive to doctor and hospital appointments, move to a new home, or search for a new job.
For business use, you don’t have to use the standard mileage rate. Instead, you could keep track of costs for oil, gas, and maintenance, and deduct those. But most people find it easier to use the standard rate. Of course, you must meet the rules for each type of deduction, and in some cases you’ll have to itemize to claim the benefit.
For 2005 the mileage rates became more complicated. First, the IRS increased the business and medical/moving rates for the last four months of the year. This was done to reflect the steep rise in gas prices during the year.
Then Hurricane Katrina struck. To help those doing charitable work related to Katrina, the IRS sharply increased the charity mileage reimbursement. This new rate applies only to Katrina-related activities.
Because of the timing of the two changes, and for other technical reasons, the result is a mish-mash of rates applying on different dates and for different purposes. To help you figure it out, these are summarized in the table below.
One important point: To support your claim for any kind of mileage reimbursement, you should keep a log showing the date, miles driven, and purpose of your trip. Keeping good records can help you claim the deductions to which you’re entitled.
2005 Mileage Reimbursement (cents/mile)
Date 1/1 – 8/24 8/25 – 8/31 9/1 – 12/31
Business use 40.5 40.5 48.5
Charitable use:
Regular 14 14 14
Katrina-related — 29 34
Medical/moving use 15 15 22
Seattle Bellevue Tax Accountants
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