IRS Upped Business Travel Rates

IRS-Upped-Business-Travel-Rates

Business owners know that gas prices are historically high, which has made their vehicle costs soar. Fortunately, there is some relief. The IRS upped business travel rates for the last six months of 2022. The tax agency announced an increase in the optional standard mileage rate in the hopes that the increase helps offset vehicle costs for business owners. Taxpayers may use the optional cents-per-mile rate to calculate the deductible costs of operating a vehicle for business. Keep reading to learn more.

Prices and Rates

The average nationwide price of a gallon of unleaded regular gas on June 17 was $5, compared with $3.08 a year earlier, according to the AAA Gas Prices website. A gallon of diesel averaged $5.78 a gallon, compared with $3.21 a year earlier.

With higher prices come increased rates. For the second half of 2022 (July 1–December 31), the standard mileage rate for business travel will be 62.5 cents per mile. This is up from 58.5 cents per mile for the first half of the year (January 1–June 30). There are different standard mileage rates for charitable and medical driving.

Unusual Circumstances

Raising the standard mileage rate in the middle of the year is unusual. Normally, the IRS updates the mileage rates once a year at the end of the year for the next calendar year. However, the tax agency explained that “in recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2022.” But while the move is uncommon, it’s not without precedent. The standard mileage rate was increased for the last six months of 2011 and 2008 after gas prices rose significantly.

While fuel costs are a significant factor in the mileage figure, there were other contributing elements. The IRS notes that “other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.”

Two Mileage Options

The optional standard mileage rate is one of two methods a business can use to compute the deductible costs of operating an automobile for business purposes. Taxpayers also have the option of calculating the actual costs of using their vehicles rather than using the standard mileage rate. This may include expenses such as gas, oil, tires, insurance, repairs, licenses, vehicle registration fees and a depreciation allowance for the vehicle.

From a tax standpoint, you may get a larger deduction by tracking the actual expense method than you would with the standard mileage rate. But many taxpayers don’t want to spend time tracking actual costs. Be aware that there are rules that may prevent you from using one method or the other. For example, if a business wants to use the standard mileage rate for a car it leases, the business must use this rate for the entire lease period.

We’re Here to Help

Your business may get a helping hand now that the IRS upped business travel rates for the last half of the year. If you have additional questions about your business’s vehicle expenses, the knowledgeable team at Ramsay & Associates is here to help. Consult with us about your unique circumstances to determine the best course of action.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

Deducting Business Expenses

Deducting Business Expenses - Ramsay & Associates

 

As you prepare tax documents and receipts for your 2016 income tax returns, pay close attention to the items that you’ll need for business expense deductions. Deducting business expenses can lower your taxable income. Even if you aren’t self-employed or a small business owner, you can take certain business-related deductions as an individual.

Individual Tax Returns

If you are an employee, you may be able to deduct work-related expenses as miscellaneous itemized deductions. These deductions must exceed the standard deduction as well as 2 percent of your adjusted gross income. This is commonly known as the “2 percent floor,” meaning you may only deduct expenses above that amount. All deducted expenses must be from the 2016 calendar year, be business-related, and be “ordinary and necessary.”

Here are some common deductions and guidelines:

Vehicle and Travel

  • Although expenses for your regular daily commute, including parking, aren’t deductible, some local transportation costs qualify. For example, traveling from one workplace location to another would qualify, as well as from your home office to another workplace location if your home office is your primary place of business for your employer. Parking fees for a business meeting outside of your usual daily commute are deductible. More information about home offices and transportation costs is available from the IRS website.
  • Use standard mileage rates to calculate deductible costs if operating your personal vehicle for business purposes. 2016 mileage rates are 54 cents per mile for business miles, such as traveling to meet a client or attend a conference. If you do not use the standard mileage rate, you can deduct actual car expenses for the year.
  • While on a business trip, you can deduct costs incurred such as airline, train, or taxi fares, car rental, baggage fees, meals, lodging, and tips. Find more details here.

Entertainment Expenses

  • Business entertainment expenses are subject to certain limits. Generally, 50 percent of meal and entertainment expenses are allowed, with records to prove their business purpose. Learn more.

Home Office

Use of part of your home exclusively and regularly for conducting business may also allow for deductions of certain expenses, such as mortgage interest, property taxes, utilities, and home repairs. Learn more about the requirements to claim these deductions.

Other Potential Deductions

  • Memberships or dues to professional organizations
  • Job search expenses, including travel expenses
  • Work clothes or uniforms that are a condition of your employment, but that would not be suitable for everyday use

Small Business & Self-Employed

If you are self-employed or the owner of a small business, there are additional deductions and requirements to consider when filing your business taxes, excluding cost of goods sold, capital expenses, and personal expenses. Some deductible business expenses include:

  • Fees for professional services
  • Employee wages and benefits, such as health or life insurance, as well as contributions to retirement plans or profit-sharing
  • Advertising costs
    Education expenses, such as fees for seminars or courses to maintain professional certifications
  • Fees for banking, attorney, or accountant services
  • Federal, state, and local, payroll taxes

Refer to the IRS website for additional information on these and other business expenses deductions, or contact Ramsay & Associates with your questions. We provide tax preparation services businesses as well as individuals. Call us at 651.429.9111.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

2014 IRS Standard Mileage Rates

The IRS recently announced the standard mileage rates for 2014.SMR Image  The rates will actually decrease by .5 cents per mile for both business use and medical and moving mileage.

The new standard mileage rate for business for 2014 will be 56 cents per mile.  The 2014 rate for moving and medical mileage will be 23.5 cents per mile.

This is also a good opportunity to remind everyone of the importance of keeping a mileage log.  If your mileage deduction ever comes under audit, the IRS will expect to see a log of the miles driven and the purpose for the miles.  You can use a simple notepad in your car, or one of a variety of mobile apps to help you log all the miles you drive and make your log easier to complete.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

Tax Season Update

Tax season moves quickly, and at the end of this week, there will be a short four weeks left until the individual tax deadline is upon us.   There have been a number of developments since our last posting, so below you’ll find some of the highlights you may have missed.

  • The IRS has gotten its computer systems up to date with the “Fiscal Cliff” legislation, passed in early January. This means all tax returns can now be filed, as the final forms have been released, and tax software providers have gotten their updates in place. This is a full three weeks faster than anyone expected.
  • Intuit, the maker of TurboTax, as well as several professional-grade tax software programs, ran into significant issues with the Minnesota tax return, leading to about 10,000 tax returns being delayed. Intuit had until today to get the issues corrected, and says they have notified anyone who was affected.  We use a different software provider.  This is a great example of the importance of having a tax professional working for you – the software can’t always be trusted to get the right result.
  • Governor Dayton removed the “business to business” sales tax from his proposed budget, which is great news. If left in place, professional services, like accounting and legal services would have been subject to sales tax.
  • The Standard Mileage Rate for business miles driven in 2013 is 56.5 cents per mile.

Corporate taxes are due by this Friday, March 15th, and as always, we’re here to help with your tax and accounting needs.

IRS Updates for 2012

The IRS announced December 12th that the standard mileage rate used for businesses will stay at the current level of 55.5 cents per mile for 2012.

In addition, personal and dependency exemptions on the personal return will be worth $3,800 each, and each of the standard deductions moved slightly higher as well.  Also, the maximum amount of wages subject to Social Security taxes will move up $3,300, to $110,100 per person.

Debate continues to rage on extending the payroll tax holiday currently in place.  We’ll stay tuned to the latest coming out of Washington.