Washington (Oct. 16, 2003) -- The Internal Revenue Service has reduced a record-keeping burden for many taxpayers by allowing businesses that use no more than four vehicles at the same time for business purposes to use the standard mileage rate, starting in 2004. Currently, those using more than one vehicle at a time cannot use the standard rate at all, leaving them to track the actual expenses for each vehicle.
"With this change, more than 800,000 businesses will become eligible to use the standard mileage rate," said IRS Commissioner Mark W. Everson. "This reflects our ongoing interest in reducing the burden for businesses to comply with the tax laws."
Although many taxpayers may still claim actual vehicle expenses for various reasons, the IRS estimates that small businesses will save 8-to-10 million hours a year in record-keeping with this expansion of the standard rate option.
A taxpayer may not use the standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS), after claiming a Section 179 deduction for that vehicle, or for any vehicle used for hire.
Beginning Jan. 1, 2004, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:
● 37.5 cents a mile for all business miles driven, up from 36 cents a mile in 2003;
● 14 cents a mile when computing deductible medical or moving expenses, up from 12 cents a mile in 2003; and,
● 14 cents a mile when giving services to a charitable organization.
The standard mileage rates for business, medical and moving purposes are based on an annual study of the fixed and variable costs of operating an automobile. The primary reason for the mileage rate increases is the rise in fuel prices during the study period, which ended on June 30. The charitable standard mileage rate is set by law.
-- WebCPA staff
