As you know, taxes are going up. So make sure you maximize your HSA contribution, as anything you put in becomes income that you are not taxed on. And while you’re at it, make sure you’re getting every other writeoff for which you qualify, including mileage on your car. The rate is up a penny from last year in case you use your vehicle for business or charity work.
The IRS has set the mileage rate at 56.5 cents a mile. And, you can claim that rate in lieu of depreciation and operating expenses. Here’s how that works. Let’s say you roamed some 10,000 miles for business travel. You don’t necessarily have to deduct depreciation, gas and oil, insurance, car repair, etc. You may want to deduct $5,600.
How to Depreciate a Vehicle
For every business mile you deduct using 56.5 cents per mile, you can depreciate your vehicle by 23 cents a mile. Even with the IRS rate, you have an adjusted basis in this business vehicle and you incur gain or loss on the sale of your vehicle.
The Medical and Moving Expense Rate
In 2013, the regular mileage rate is 24 cents per mile for expenses dealing with health care or relocating. While that’s up a penny from last year, the standard business rate remains higher. That’s because this rate only covers out-of-pocket costs like gas and oil. It doesn’t include general maintenance, depreciation, insurance or registration fees. The same is true for charitable mileage.
Charitable Mileage Will Not Change
This is still 14 cents per mile. You may deduct either that or your actual out-of-pocket operating costs when using your vehicle to provide donated services for a charity, which are likely to be greater.
Instead of the IRS, lawmakers set the charitable mileage rate and that hasn’t been updated since December 1997, so it’s out of whack now. The business, medical and moving rates have been updated by the IRS annually and, of course, just about everything cost a lot more now. Remember what the price of gas was in 1997? It was about $1.30 to $1.50!
Anyway, here’s to keeping more of your money in your own pocket.