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How Does IRS Mileage Rate Work?

Since January 2009, we can use the IRS mileage rate to determine how much we are allowed to claim a deductible expense. We can also use it to operate a car or vehicle for medical use, moving purposes and even for business use.

With the cost of fuel slowly creeping up again, making the most of claiming for deductible expenses for vehicle use means the IRS Mileage Rate could prove very convenient for many people.

Remember that there are two ways to calculate deductible vehicle costs when you are calculating your own deductible expenses as well as factoring in the IRS mileage rate throughout the tax year.

For the vast majority of people using the IRS Mileage rate can help to reduce your tax liability. It increases the amount you are potentially likely to claim in deductions.

Somehow, another choice for lots of business people is to count the actual expenditures of the operating a car all the way through the year, which means keeping an exact log book to record all miles driven.

That also means keeping all your receipts for servicing, fuel and maintenance costs, as well as registration and insurance costs should be included, together with any other routine maintenance or repairs that may come up all the way through the year.

Noting so many expenses throughout the year can be a bit troublesome on the paperwork side of things, and a lot of people prefer to only apply the calculation for the IRS mileage rate.

On the other hand, if you are willing to put up with a bit burdensome of keeping receipts as well as calculating the real costs, you might find that your deductions out weight the total amount handed automatically by the IRS Mileage rate.

The best way to determine whether you should use the IRS Mileage Rate or the actual cost basis is to speak to your accountant.

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