Good news if you use your car for business, medical or moving purposes: The IRS is raising the tax-deductible mileage rate to offset high gas costs.
Starting July 1, when you use your car for business, you'll be able to write off 55.5 cents (the standard mileage rate) for each mile you drive through December 31, 2011. This is a 4.5-cent increase from the amount you could deduct the first half of the year. For more information about using the standard mileage rate when deducting expenses for the business use of your car, see Tax Topic 510.
The standard mileage rate for calculating deductible moving or medical expenses also will increase by 4.5 cents to 23.5 cents a mile. If you use your car to move and the move is connected with taking a new job at least 50 miles farther from your old home than your old job was, you can write off 23.5 cents for each mile you drive. You don't have to itemize on your tax return to claim this deduction. For more information, see Tax Topic 455, Moving Expenses.
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You can use the standard mileage rate when tallying transportation costs when you drive your car to the locations where you receive medical care. However, you must itemize to deduct medical expenses, and you get a tax break only to the extent your total unreimbursed medical costs exceed 7.5% of your adjusted income. See our Taxopedia for more information about deducting medical expenses.
The standard mileage rate for using your car to provide services for charitable organizations -- 14 cents a mile -- will not increase. This rate is set by statute, not the IRS.
To maximize your deductions year round, subscribe to the Kiplinger Tax Letter.
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