IRS Raises Mileage Rate for 2000
(RIVERWOODS, ILL., October 7, 1999) – The standard mileage rate for cars used for business will pop back up to its 1998 level of 32.5 cents per mile in 2000 after declining to 31 cents per mile for most of this year, according to CCH INCORPORATED (CCH), a leading provider of tax and business law information. The standard rate is used to calculate the tax deduction for business travel as an alternative to deducting the actual costs of maintaining an automobile. It is also used by many companies to reimburse employees who use their own cars on company business.
This year, the IRS adopted an independent contractor's recommendation, which changed the way the rate is calculated, according to CCH principal federal tax analyst Mark Luscombe, JD, CPA.
"The contractor that calculates costs that are used to compute the rate noted that most people who use their cars for business purposes generally have individual, rather than business, insurance on their vehicles," Luscombe said.
1999 Decline an Exception
The business mileage rate has consistently increased until last year, when falling gasoline prices dictated that the rate for 1999 should fall. This threw the payroll departments of many companies into a state of consternation. They had adopted a practice of waiting until well into the new year to implement any change in reimbursements for employee car travel. Then they could make good any shortfall due to an increased rate. But if the rate was lower, then they would have to report any overpayments as taxable income, subject to federal and state withholding. In the end, the IRS was persuaded to defer the effective date for the 1999 business rate until April 1 of this year.
Charity, Medical, Moving Rates Unchanged
Other key mileage rates are unchanged for 2000. The rate for charitable use of a vehicle remains fixed by law at 14 cents per mile. The rate for medical and moving expenses, which is adjustable, remains at 10 cents per mile. This rate is used for the expense of seeking medical care or for car expenses associated with a move for which expenses are deductible. The calculations for the medical and moving expense rate do not include such items as insurance, depreciation, repairs and maintenance, and are therefore lower than the business rate. Taxpayers use the standard rates rather than keeping track of all the actual costs, such as gas and oil, of operating a vehicle. However, they may also deduct the actual costs of tolls and parking fees in taking the business, charitable, medical or moving deductions, CCH noted.
About CCH INCORPORATED
CCH INCORPORATED, founded in 1913, has served four generations of business professionals and their clients. The company produces approximately 700 print and electronic products for tax, legal, securities, human resources, health care and small business markets. CCH is a wholly owned subsidiary of Wolters Kluwer U.S. The CCH web site can be accessed at www.cch.com.
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