2015 IRS Mileage Rates Guide

Whether you’re self-employed, a freelancer or a small business owner, you know that the cost of doing business adds up fast. Fortunately, there are ways to mitigate those costs. If you do any traveling for your business, then one of those ways to save is by deducting the costs associated with travel on your taxes. With some simple accounting, you can use either the actual cost of travel or the standard mileage rates issued every year by the IRS in order to lower your tax burden.

Illustration of a car on the road

Here’s how to use the IRS 2015 standard mileage rates to save money at tax time!

What Are the Standard Mileage Rates?

Each year, the IRS calculates mileage rates based on a study of the costs of vehicle operation. These costs include things like maintenance, tires, repairs, gas, registration fees, depreciation, and other factors. If you use your vehicle for medical purposes, the rate is based on the average costs of variable expenses like gasoline, and if you use it for charitable reasons, these rates are regulated by law. These rates don’t apply to every vehicle on the road, but they do apply to cars, pickup trucks, vans and panel vans. The 2015 per-mile rates are as follows:

  • 57.5 cents for business miles
  • 23 cents for medical and moving miles
  • 14 cents for miles driven for charitable organizations

In comparison to the 2014 mileage rates, this year business miles rose by 1.5 cents per mile, medical and moving miles dropped half a cent, and charitable miles remained the same.

Now that you know the amount that you can deduct per mile, you should know that you don’t have to use these rates to make your travel deductions. If you think your travel costs will work out to more than your per-mile rate, you can deduct your actual travel costs instead.

Should You Use Standard Mileage Rates or Deduct the Actual Cost?

The simple answer to this question: is which method gives you the bigger deduction? But before you can answer that, there are a few things to consider. First, there are limitations that may preclude you from using the standard mileage rate:

  • You must own the car or lease it.
  • You can’t claim more than five cars or use these rates as a deduction if you operate a fleet.
  • You need to use the straight-line method (remaining value minus cost, divided by the useful life of the vehicle) for factoring depreciation.
  • You may not claim a Section 179 tax deduction on your car.
  • You may not have claimed actual expenses during any tax year since 1997 for your vehicles.

If none of these limits apply to you, then congratulations! You can claim the standard mileage rate.

However, before you do so, you should make sure that the standard mileage rate is worth more than the actual cost deduction. The simplest way to do this is to keep two logs. Use a spreadsheet, notebook, mobile app or whatever works best for your business. The first log should track mileage. That is, for each trip, write down the date, purpose of the trip and the starting and ending mileage from the odometer. Then, at tax time, you can tally up the miles used and multiply them by the mileage rates that apply.

Actual costs are a little more difficult to track, but still relatively easy. With this method, keep a written log of all vehicular expenses: repairs, maintenance, gas, oil changes, insurance, registration fees, the vehicle’s depreciation or lease payments, and any other associated cost. When the time comes, you can add these numbers up, compare the total to your mileage rate, and see which one comes out on top.

As with any tax paperwork, hang on to your vehicle’s mileage and expense logs. Should you ever be audited, the IRS will want to take a look at them to make sure that your numbers match up with those filed on your tax return.

Business Versus Personal Use

Let’s say that you (not your business) or an employee owns a car that does double duty on both personal errands and business miles. In these instances, if you try to factor for actual cost, the accounting becomes murky. How much of the yearly registration fee applies towards business use, or how much gasoline did you exclusively use on business trips, not on personal errands? Where does the cost of the car come in?

In these instances, you’ll need to track mileage and use the standard mileage rate. But, rather than tallying the miles and using them as a business deduction, you should instead reimburse yourself or your employee for the miles traveled. These reimbursements are not counted as taxable income for yourself or your employee but your business can claim them as deductions.

Whether you’re a small business owner or a freelancer, if you do any business travel, then you can definitely deduct your travel expenses. The key is to keep excellent records, both of your mileage and of all your automotive expenses. With that information, you’ll be able to figure out not only which deduction is best for you, but also how much you’ll be able to deduct come tax time.