The IRS has announced the new mileage deduction rates for 2011. These rates help establish one of the more loved deductions for small businesses. 

The news is in on the tax front and the news is bad. As I write this, there is no clear indication of what will happen with the Bush tax cuts. It doesn’t really matter. If you look at the federal tax rate alone, you are missing the big picture. 2010 is the year of rising taxes and 2011 looks to be just as bad. Where are taxes going up? Local and state levels since governments at this level cannot borrow money. 

Fortunately, many of the run of the mill tax deductions have not been harvested by the various government agencies. The mileage deduction is a personal favorite. You can deduct the mileage you incur in your vehicle while carrying out business as well as some other lesser areas. Since most of us drive a lot in our business efforts, this can add up to a sizeable deduction each year.

The IRS has announced the rates to be used in 2011. The standard mileage rate for business travel will be 51 cents. To figure your deduction, you simply multiply your total mileage by this figure. If you drive 10,000 miles on business in 2011, your deduction would be $5,100. That’s not bad! It goes without saying, however, you need to be careful. You need to maintain a physical mileage log in case the IRS audits you and wants to see it. 

One final word on the 2011 mileage rates. These are for the 2011 tax year, not the just completed 2010 return. This may seem obvious, but I can’t tell you how many people accidently will use the 2011 rates next April when they file their returns. Errors lead to audits, so make sure you don’t make this mistake.