Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Posted by taxguru on September 21, 2002

Auto Mileage Rates For 2003

Due to the slightly lower fuel prices as of June 30, IRS has announced the standard rate for business miles will be 36.0 cents for 2003. This is a half cent decrease from the 36.5 cents for 2002 business miles. Companies that base their employee reimbursements on the IRS rate have plenty of time to make the necessary changes.

In all of my almost 27 years in the tax business, this is the earliest I have seen IRS release their official mileage rates. It wasn’t long ago that they were announcing their standard rates in late December or early January, causing a mad panic for everyone who uses that rate for such things as official reimbursement plans.

I don’t mean to be a nitpicker here, but I’m not so sure that calculating the official deductible cost of operating a vehicle this early is realistic, especially in these uncertain times with the Middle East. The largest changes in the IRS rates have been caused by changes in the price of fuels. If a big war starts up in Iraq or other oil producing countries, and the price of gas skyrockets, IRS will either have to raise the official rate or people will need to use their actual expenses when calculating their vehicle deductions.

Of course, if there is a huge change in the price of fuels, we will probably see IRS issue a mid-year change in the rate, as they did in 1999, where it was 32.5 cents per mile from 1/1/99 through 3/31/99 and 31.0 cents per mile from 4/1/99 through 12/31/99. That makes taxes & accounting for vehicle expenses even messier than it normally is.

Likewise, there will be changes in some of the other IRS mileage deductions.

The standard mileage rate for use of a car for medical reasons will be 12 cents a mile. The 2002 rate is 13 cents a mile.

The standard mileage rate to use when computing deductible moving expenses will be 12 cents a mile. The 2002 rate is 13 cents a mile.

The standard mileage rate for the use of a car when providing services for a charitable organization remains at 14 cents a mile.

Again, this just illustrates the immense intellect of the IRS head honchos. They have been able to determine through their extensive research that vehicles cost less to operate for these other purposes than for business. This is quite different from the operating costs calculated by such unbiased sources as Hertz, who issue annual press releases claiming that it costs well over a dollar per mile to operate a car. Since my formal education in this area consists of nothing more than Auto Shop in high school, where we never covered this aspect of auto science, I have to trust the IRS brainiacs to steer us in the right direction.

KMK

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