As of July 1, 2011, the IRS has adjusted the standard mileage allowances for use of a car in travel to 55.5 cents per mile for business travel (up from 51 cents), and 23.5 cents per mile for moving expenses (up from 19 cents). The IRS, which normally adjusts these rates on an annual basis, made the change mid-year to accommodate swelling fuel costs.
"This year's increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the recent increase in gas prices," said IRS Commissioner Doug Shulman. "We are taking this step so the reimbursement rate will be fair to taxpayers." While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.
Worldwide ERC® Tax Counsel Peter K. Scott notes that “If an employee uses his or her automobile in a move that qualifies under IRS Code §217, he or she may either deduct the actual out-of-pocket expenses, such as gas, oil, repairs, parking, and toll fees but not depreciation, maintenance, or insurance, or take the current standard deduction, plus parking and toll fees. Business travel expense deductions also may be computed based on actual expenditures (including depreciation, etc.) or on a standard rate.”
Scott also noted that an employee cannot deduct moving expenses using the business travel rate (Adamson v. Commissioner, 32 T.C.M. 484 (1973)). If the employer reimburses the employee at the business rate, the difference between the reimbursement and the amount the employee is permitted to deduct at the moving expense rate would constitute income to the employee, subject to withholding, employment tax, and reporting on the Form W-2.
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