2013 Mileage Deduction Rate by IRS Will Impact Business Taxes

Using a company car or taking the standard 2013 mileage deduction rate is the topic of a new tutorial released by LegaLees Attorney, Lee R. Phillips

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Lee R. Phillips

Lee R. Phillips

“Many small business owners don’t bother with the mileage deductions for business miles traveled. But, with the new tax laws, it will be very important to take every deduction possible.”

Siesta Key, FL (PRWEB) November 29, 2012

The 2013 Mileage Deduction Rates were released by the IRS November 21st. The mileage rate numbers climbed a little from the 2012 mileage rate numbers. That will mean a slightly larger deduction, which will be particularly important for small business owners in 2013.

”Business owners often can’t decide whether to use the mileage rate deductions or have their car owned by their company. There are a number of disadvantages to having a company car, but there are also disadvantages to having a personal car used for company business. It’s a touchy subject. The easiest thing to do is just use the mileage rate deductions in a personal car,” said Lee R. Phillips, attorney.

The 2013 mileage rates compared to the 2012 mileage rates are as follows:

Business        
2012 mileage rate is 55.5 cents per mile
2013 mileage rate is 56.5 cents per mile

Medical        
2012 mileage rate is 23 cents per mile
2013 mileage rate is 24 cents per mile

Moving        
2012 mileage rate is 23 cents per mile
2013 mileage rate is 24 cents per mile

Charitable        
2012 mileage rate is 14 cents per mile
2013 mileage rate is 14 cents per mile

“Many small business owners don’t bother with the mileage deductions for business miles traveled. But, with the new tax laws, it will be very important to take every deduction possible. If a small business person can get deductions that lower their adjusted gross income, that will be significant in 2013,” said Hal Rosen, CPA and small business consultant.

Business travel in 2013 is subject to the 2013 mileage rate deduction. The deduction goes directly against the income of the company. If the business is taxed as a sole proprietorship, partnership, or S corporation, that means the deduction is applied before a small business owner recognizes the company profit or loss on their personal tax return.

There are a number of pros and cons to taking mileage rate deductions and having a car owned by a company. The tutorial on company car vs. personal car can be found HERE.

“An accountant would say that the mileage rate deduction comes out ‘above the line,’ which means it lowers the taxpayer’s adjusted gross income,” said Rosen.

With the new tax laws, increased taxes will be paid by the “wealthy,” those who have been defined as those making over $250,000 per year for married couples and $200,000 per year for single tax payers. These numbers refer to the taxpayer’s adjusted gross income.

“Small business owners are the ones that will be hardest hit by the new tax laws. They are going to have to do everything they can to lower their adjusted gross income below the income benchmarks defining someone as wealthy,” said Lee R. Phillips attorney.

“The mileage rate deductions have more meaning when a small business owner is struggling to get below the tax thresholds. This may be one of the least of the business deductions that lower adjusted gross income, but they are all important now,” he said.

Mileage that will be multiplied by the mileage rate has to be carefully kept track of. The IRS requires proof of the miles traveled. There are a number of ways to keep track of the miles. They range from the old fashion pencil and paper to new smart phone apps that use GPS technology to keep track of the miles traveled.

Rosen points out, “You can carefully plan your travel to qualify for business mileage rate deductions. As long as someone makes a business stop in the trip, the entire trip is deductable, even if there was a personal stop along the way.”

“By planning and being organized, a small business person can save some taxes. For example, assuming there were 10,000 miles traveled for business, the tax write-off would be $5,650 using the 2013 mileage rate. That lowers the individual’s adjusted gross income by that much, which could drop them below a critical tax threshold,” explained Phillips.

“There are a number of great tax tips that lower a tax payer’s adjusted gross income. With taxes going up, every deduction counts, particularly the ones that lower adjusted gross income,” he said.


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