While the Obama administration was blaming businesses yesterday for what is in our view an understandable lack of hiring as the Great Recession drags on, the Internal Revenue Service made things worse by cutting the tax deductible mileage rates for firms.
Watching Your Wallet!
In effect, this is a tax increase for all those businesses that are struggling to stay afloat during the worst economic climate since the Great Depression. Is it really that hard to figure out why there is no hiring underway?
Beginning on January 1, 2010, the new standard mileage rates for the use of a car, van, pickup or panel truck will be:
- 50 cents per mile for business miles driven
- 16.5 cents per mile driven for medical or moving purposes
- 14 cents per mile driven in service of charitable organizations
The new rates for business, medical and moving purposes are lower than last year’s by roughly ten percent. The mileage rates for 2010 reflect, according to the IRS, “generally lower transportation costs compared to a year ago.”
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.
“The primary reason for this year’s reduction in the national per-mile business driving rate is significantly lower fuel prices. Other factors contributing to the rate change include depreciation, insurance and maintenance costs,” said Ted Schuerman, senior project leader, Runzheimer International. “The detailed information we compile annually demonstrates shifting market conditions across the country and helps the IRS and many other organizations make informed business decisions.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
More details on here on Revenue Procedure 2009-54 regarding the standard mileage rates.