Types of Mileage Tax Deduction

When it comes to tax calculations, you need to know the types of deduction that you are eligible for. A deduction to watch out for is the one you may claim for your vehicle's travel expenses, for certain specific purposes during the past financial year.

Mileage Tax Deduction Types

In this time of economic recession, every penny and dollar that can be saved, should be saved! When it comes to paying your taxes, there are tax deductions which you can count upon to save your money. The Internal Revenue Services (IRS) has implemented these tax deductions for the purpose of promoting business, charity, and reimburse people for medical related travel expenses. These deductions can be claimed only if you have a very accurate record and proof of your yearly travel expenses. This is because the IRS needs every penny to be accounted for when it comes to tax deductions.

That is why, it's absolutely necessary that you maintain a meticulous chronological record of your travel expenses which includes gas receipts, toll fees, car maintenance and repair receipts, and details of travel destinations along with logged miles and purpose of travel. A clear record needs to be kept of the travel which was totally business, medical, moving or charity related. That is because deductions can be claimed for records of business, medical, charity and moving related travel only! Advantage of these tax deductions is highest for businesses who have high travel expenses.

Business
There are two ways in which you can claim deductions in case you are running a business. One is by claiming deductions based on actual expenses and the other is by claiming deductions according to standard IRS mileage rates per mile.

Gaining the reimbursement on basis of actual calculation of miles is advised when you have a new car and your mileage expense is not that high, as you can get a reimbursement on the depreciation. When you have multiple cars or when you have logged in a lot of business miles, the second option of going for a flat reimbursement on number of logged miles is beneficial.

Medical
If you have engaged in extensive travel related to medical service, then you can claim a tax deduction on that basis. You need to have the proof of medical related travel and detailed report of expenses.

Charity & Moving
In case you have moved around due to job change or if you have been engaged in travel for the sake of charity, then tax deduction for the same can be claimed.

What are the Current Rates?

To calculate the deduction, what you need are the IRS mileage rate for either business related or other travel. The mileage rates are decided by the IRS every year based on the fuel economy scenario in that year. You do not need a tax deduction calculator for the job as the calculation is quite simple. Here are the IRS mileage rates for the year 2010:

• Business Related Mileage Rate: 50 cents per mile
• Moving & Medical Related Mileage Rate: 24 cents per mile
• Charity Related Mileage Rate: 14 cents per mile

Tax calculation can be a simple exercise if you divide the whole calculation into smaller parts and attack one at a time.