The optional standard mileage rates for 2012 have been issued by the IRS. The rates are used to deduct automobile operational costs for business, charitable or health purposes. They are as follows:

• 55.5 cents for every mile for miles driven on business trips
• Twenty three cents per mile driven for health or moving purposes
• Fourteen cents per mile driven for purposes of charity

The above rates take effect from the 1^st of January in 2012, and reflect a very minimal change from the rates that had taken effect on the 1^st of July 2011. In fact, the rates for charitable movements and business miles have remained unchanged, as has been the case for the last 15 years. Mileage rates for charitable organizations are set by Congress and are not adjusted for cost of living.

Under the current rules, one can use the standard rate of mileage, regardless of whether or not they are reimbursed, and whether or not that reimbursement is higher or lower than the amount arrived at using the standard rate of mileage.

Another option available to taxpayers is the option of deducting actual car expenses instead of the standard rate of mileage. Actual car expenses are expenses attributable to the use of the car. These include depreciation, repairs, tires, gas expenses, insurance cover, and license as well as registration fees. To determine one’s deduction, one should add up his/her expenses every year. The portion that is attributable to the business use of the car is deductible, but if the car is used for both personal and business purposes, then the expenses must be pro-rated.

Timing and ownership are very crucial in the deductions and in deciding which method to apply. If one’s wish is to use the standard rate of mileage and one owns a car, then one should make a claim in the first year the car is used in one’s business. In the following years, one can claim either the standard rate of mileage or the actual expenses.

For those who opt to use the standard mileage rate on a leased car, they must use it for the entire period of lease. One must make the choice, which cannot be revoked, by the due date of one’s return, including extensions. Regardless of the method one uses, whether the standard mileage rate or actual car expenses, parking fees, toll charges, interests as well as taxes are deductible separately for purposes of business, medical, moving, and charity.