Bank finance articles and tips

For the 2011 tax year, the IRS has made mid-year standard mileage deduction rate adjustments for both business and health related car expenses; it has increased the rate of mileage deduction to cushion against the ever seemingly high and rising fuel prices. The IRS does not customarily make such mid-year adjustments and instead provides an annual standard mileage rate guideline once during fall to apply for the next tax year. However, when the fuel prices rise significantly within a year, the IRS can raise these rates as it did for 2011. The last time that the IRS made such mid-year adjustments was in 2008, when the fuel prices drastically rose following the economic recession.

How Have the Rates Changed?

The standard mileage rates adjustments affects the period of July 1st 2011 to December 31st 2011. For business-use cars, the standard rate has been adjusted from 51 cents a mile to 55.5 cents a mile. For health-related car expenses, the standard mileage rate has been adjusted from 19 cents a mile to 23.5 cents a mile. The mileage rates applying for charity travel have remained the same at 14 cents a mile.

What is the Standard Mileage Deduction?

The standard mileage deduction is one of two options that business people and other taxpayers use to determine the car expense amount to be deducted for their taxation purposes. A taxpayer can choose to either compute the actual car expenses incurred including fuel costs, car maintenance, depreciation, and insurance, then deduct the portion of these costs that attributed to business, health travel, or charity related travel. On the other hand, the taxpayer can choose an easier option of applying this standard mileage rate per mile covered. In other words, for the second half of 2011, businesses will multiply 55.5 cents for every mile covered for business purposes. The business person will therefore, need to keep a clear log of the distances covered for business purposes. The same applies for the charity standard deduction and the health related car expense. A person applying the standard mileage rate option can also claim car parking charges and toll charges. To apply the standard mileage deduction, one has to itemize their deductions when filing returns.

Other Car-Related Tax Relief for 2011

Besides the raise in the standard mileage rates, there are also other tax reliefs available for people who own cars. Business people who buy cars that weigh over 6,000 pounds between September 2010 and January 1st 2012 can now apply a bonus depreciation of 100% on the same year of purchase. This means that such businesses can recover the whole purchase price of these qualifying cars in the first year of purchase. Other cars that weigh below 6,000 pounds also have bonus depreciation of about 70% on the first year of purchase. However, people claiming this bonus depreciation can only do so if they use actual car expenses as opposed to deducting car expenses using the standard mileage rate of deduction.

Other car-related tax reliefs include the energy efficient car credits contained in the American Recovery and Reinvestment Act of 2009, including credits for cars that convert from fossil fuel to electric, purchase of qualifying plug-in electric drive cars, and the alternative motor vehicle credit. You can also claim losses under the Casualty and Theft Losses tax deduction if your car is destroyed or damaged due to an unforeseen event.

Rob L Daniel and partners of Limon Whitaker & Morgan, for years have helped businesses and individuals Nationwide, with their delinquent IRS & State tax problems. The firm is based in Los Angeles, California USA.

http://www.limonwhitaker.com
Tel:888.321.6188

You have permission to republish and use this article in your newsletter,website,or blog as long as you leave the article fully intact, and include this resource box at the end of the article.

By Rob L Daniel
Author Links
Business: http://www.limonwhitaker.com
Article Source: http://EzineArticles.com/?expert=Rob_L_Daniel