IRS: Mileage Rate Increases 1 Cent in 2013

0
Mileage Rate in 2013

Source: web

We’re only hours into the new year, but the IRS is gearing up for tax season and the myriad of changes in the various tax rates, including the deduction rate for business travel, which will rise to 56 cents a mile as well as the rate for both medical travel and moving, which increases to 24 cents. Meanwhile, charitable rates do not increase.

Many of us are vigilant in our efforts of documenting the miles we travel back and forth to business meetings, luncheons and other professional networking events. We know we can deduct those miles on our annual tax returns. While these deductions aren’t going to make us wealthy, any deduction we can claim can add up quickly.

In its first increase since 2011, the Internal Revenue Service is upping the deductions for mileage. You may recall the 2011 increase was due to the incredible rise in gas prices and so concerned was the government that it increased the rates nearly five cents per mile – and even more surprising was the fact the decision was made in mid-summer, which is something that’s usually unheard of for the IRS.

Now, the IRS is expanding our possible tax savings for 2013. It’s only a penny increase in the standard mileage deduction amounts, but it’s applicable for travel connected to business, medical treatments and mileage associated with moving. Remember, though, if you’re using a personal credit card and not a business card, you’re still paying interest on your gas. The mileage can help offset some of it, but you’re not going to break even nor was the law ever designed for you to break even.

Why just a single penny? It’s likely because gas prices and other adjustments have begun to level off. Starting today, you’ll earn 56 cents per mile of business travel and for each mile traveled for medical purposes and moving, you earn 24 cents. Every little bit helps, right?

There’s a federal contractor, Runzheimer International, that looks at a number of formulas associated with fixed and variable automotive operating costs; including things like insurance for vehicles, wear and tear considerations, the national economy, the fuel economy and other very specific factors. Using that information, it reports its findings to the Internal Revenue Service, which then uses it to determine if and how much it will raise mileage for that year’s tax filers. While we usually expect it to increase the mileage, the government agency can also decrease it.

Higher maintenance costs and fuel prices are the primary reasons for the increase in the national optional business deduction,

said Ted Schuerman, who is a senior project leader at Runzheimer International. This was included in the package sent to the IRS announcing his firm’s findings.

Guidelines for Monetary Donations
And speaking of the IRS, here’s the latest on charitable donations using cash, credit card, debit card, check or any other time of monetary donation. The IRS states that deduction of any charitable donation, regardless of amount,

a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid.

Further, it says all credit card statements must show the name of the charity, the date, and the applicable transaction date – usually referred to as the posting date.

It then explains what’s considered “donations of money” and includes those made in cash or by check, electronic funds transfer, credit card and payroll deduction. If it’s a payroll deduction, taxpayers must hold on to check stubs, wage statements or any other formal documentation from their employers that provide the details such as how much was withheld and the pledge cards that provide details on the charity itself. If any one donation totals $250 or more, the taxpayer must obtain an acknowledgment from that charity; however, the IRS also explains that one statement could serve the purpose of any donations if it provides the relevant information.

We also found a bit more information on the IRS website.

You contributions are deductible in the year they’re made. This means donations charged to a credit card before the end of 2012 count for 2012. Keep in mind that this is true even if the credit card bill isn’t paid until 2013. Also, checks count for 2012 as long as they are mailed in 2012.

The IRS also encourages taxpayers to carefully consider an organization before supporting it and be sure it’s also qualified. Only donations to qualified organizations are tax-deductible. Exempt Organization Select Check, a searchable online database available on IRS.gov, lists most organizations that are qualified to receive deductible contributions. Also, religious and government agencies, says the IRS, are eligible for deductible donations, even when they are not included in the database. This includes churches, synagogues, temples and mosques.

Finally, even as we’re heading for toward our deadline this morning, we’re still waiting to see what will happen with the fiscal cliff. This one wild card can change everything, so be sure you understand what changes should worse case scenario come full circle. Technically, we’re at “worst case scenario” since it’s after midnight and there’s been no deal.

Share.

About Author

David is a CPA and has spent the past decade as a financial adviser helping clients meet their fiscal objectives. With an appreciation for journalism, he has spent the past few years overseeing several financial columns as well as writing two previous finance blogs. He resides on the East Coast with his wife and two sons and has guided many through the recent recession while providing a no-nonsense approach to spending and saving.


Few Credit Card offers from our Partners

Freedom Gold Card
Freedom Gold Card

$500 Unsecured Credit Limit; Guaranteed Approval*; No Credit Check; No ...


More Info
Total VISA Credit Card
Total VISA® Credit Card

Checking Account Required; Fast and easy application process; response ...


More Info