Every year, the IRS adjusts the rates for many tax provisions because of inflation.
Beginning January 1, 2014, the standard mileage rate will decrease by a half a cent from the 2013 rates to 56 cents per mile. The rate for medical and moving purposes also decreased to 23 cents per mile. The rate for miles driven in service for charitable organizations remains the same at 14 cents per mile.
How does the IRS come up with the Standard Mileage Rate?
The standard mileage rate for business miles is based on an annual study of the fixed and variable costs of operating your vehicle. These costs include depreciation, maintenance, repairs, gas, oil, insurance, registration fees, etc.
Remember: You always have the option of calculating the actual costs of using your vehicle rather than using the standard mileage rates. However, once you use the actual expense method you cannot go back to using the standard mileage rate.
Also, you cannot use the business standard mileage rate for a vehicle after using any depreciation method under MACRS or after claiming a Section 179 deduction for the vehicle. In addition, you cannot use the standard mileage rate for more than four vehicles used simultaneously - as in a fleet operation.
Other Annual Inflation Adjustments for 2014:
- Top 39.6% Income Tax Rate - $406,750 single/$457,600 joint (up $6,750/$7,600 from 2013)
- Standard Deduction - $6,200 single/$12,400 joint (up $100/$200 from 2013)
- Personal Exemptions - $3,950 (up $50 from 2013)
- AMT Exemption - $52,800 single/$82,100 joint (up $900/$1,300 from 2013)
- Gift Tax Exemption - $14k (unchanged)
- Estate Tax Exemption - $5,340,000 (up $90,000 from 2013)
- Income Limit for Full IRA Deduction - $60k single/$96k joint (up $1k from 2013)
- Income Limit for Full Roth IRA Contribution - $114k single/$181k joint (up $2k/$3k from 2013)
- Foreign Earned Income Exclusion - $99,200 (up $1,600 from 2013)