Nov 17, 2004
The IRS has released the 2005 optional standard mileage rates that may be used by employees, self-employed individuals, and other taxpayers when computing the deductible costs of operating a passenger car for business, medical, moving or charitable purposes.
Beginning Jan. 1, 2005, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:
- 40.5 cents a mile for all business miles driven, up from 37.5 cents a mile in 2004;
- 15 cents a mile when computing deductible medical or moving expenses, up from 14 cents a mile in 2004; and
- 14 cents a mile when giving services to a charitable organization.
The 3-cent increase in the business mileage rate was the largest one-year rise ever. The primary reasons were higher prices for vehicles and fuel during the year ending in September. The charitable standard mileage rate is set by law.
When the 2005 business standard mileage rate of 40.5 cents is used, depreciation will be considered to have been allowed at a rate of 17 cents per mile. This depreciation rate will reduce the taxpayer's basis in the passenger car.
The standard business mileage rate may not be used for cars used for hire (e.g., taxicabs), or when five or more cars are owned or leased and used simultaneously by the taxpayer (e.g., fleet operations).
