The IRS has just released the 2009 optional standard mileage rates, effective beginning on January 1, 2009. The new standard mileage rates are higher than the first half of 2008 but lower than the second half of 2008. The new amounts for 2009 are:

— 55 cents-per-mile for business miles driven (down from 58.5 cents-per-mile for the second half of 2008, and up from 50.5 cents-per-mile for the first half of 2008);

— 24 cents-per-mile for medical and moving purposes (down from 27 cents-per-mile for the second half of 2008, and up from 19 cents-per-mile in the first half of 2008); and

— 14 cents-per-mile for charitable purposes (which is a statutorily fixed amount).

Calculating the deduction

Taxpayers can generally deduct the entire cost of operating a vehicle for business purposes. Costs that a taxpayer may deduct include gasoline, oil, tires, repairs, tools, parking, insurance, financing interest, taxes, licenses, and depreciation. On the other hand, in lieu of deducting the actual costs of operating a vehicle for business purposes, taxpayers can use the IRS’s business standard mileage rate. The deduction is calculated by multiplying the standard mileage rate by the number of miles driven for business, medical, moving, or charitable purposes. Additionally, taxpayers using the standard mileage rate also get to deduct the costs of parking and tolls as well as financing interest and state vehicle taxes.

Unchanged charitable rate

The rate for the charitable deduction is set by statute, not the IRS, and therefore remains unchanged for 2009 at 14 cents-per-mile.

FAVR amount for leased vehicles

Taxpayers may use either the business standard mileage rate or a fixed and variable rate (FAVR allowance) to compute deductible expenses for a leased vehicle. Employers may use a FAVR method to reimburse their employees who use their own personal vehicle for business purposes, whether leased or owned. For 2009, the standard automobile cost used to compute the FAVR allowance may not exceed $27,200, down from $27,500 for 2008.

If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose