IRS decreases standard deductions for vehicle

Standard Deductions 2014The IRS is reducing the standard per mile deduction for travel in connection with business, medical care, and moving. The new allowance for business travel is 0.56¢ per mile, which is down from 0.565¢ per mile. The deductions for medical care and moving travel fall from 0.24¢ per mile to 0.235¢ per mile. The standard deduction for driving for charitable purposes is set separately and remains unchanged at 0.14¢ per mile.

These mileage allowances provide an easy way for taxpayers to deduct expenses in connection with these activities. Instead of needing to track vehicle depreciation, maintenance, fuel, and other expenses, the standard deductions allow taxpayers to only record that travel was made for an eligible purpose with documentation of the number of miles driven.

The IRS periodically reviews these rates based on the fixed and variable costs of operating an automobile. They are intended to account for all costs of owning an automobile, and taxpayers therefore cannot take other deductions when using the standard deduction or use the standard deduction when they have previously used a depreciation method other than straight line depreciation. Taxpayers should also be aware that because the deduction is an approximation, actual expenses may at times exceed the standard deduction.

These changes take effect for travel taking place on or after January 1, 2014. Taxpayers using a calendar year tax year are not affected for their 2013 taxes. There are no other changes in the operations of the rules —taxpayers may still continue to choose whether to take the deduction or claim actual expenses, and employers may also choose to directly reimburse their employees. Employer reimbursements remain tax free as long as the rate does not exceed the new IRS rates.