IRS Issues 2012 Mileage Deduction Rates

The tax code is constantly changing in small ways every year and you need to stay up on the changes. For instance, the IRS has issued its 2012 mileage deduction rates for taxpayers. 

The annual announcement of mileage rates always leads to confusion with certain taxpayers. Let's make sure we all have it straight. These 2012 mileage rates are applicable to your 2012 taxes, the taxes you will file in April of 2013. They do not apply to the taxes you will file in April of 2012 because those taxes apply to the 2011 tax year. 

The new rates are very similar to the old rates. Beginning on January 1, 2012, you will be able to deduct business mileage at a 55.5 cents a mile rate. You can claim a 23 cent a mile deduction for mileage incurred in moving to a new job or for medical purposes. Finally, you can deduct mileage incurred for charitable causes at a rate of 14 cents a mile. 

So, how does this work exactly? Well, let's look at an example. Let's say you drive 10,000 miles in 2012 on business. You would be able to multiple this by 55.5 cents, which would equate to a deduction of $5,500. That's fairly sizeable, so it is a deduction you definitely want to take. 

Now, you can't just claim whatever you want for mileage. You need to keep documentation in case the IRS wants to verify exactly what you actually drove during the year. The answer is usually to keep a mileage log. There are programs you can use online to do it now, but you can also buy little log books at your local office supply store. 

Mileage deduction rates may seem like an announcement that causes yawns. Well, it is, but it is also one you need to pay attention to. Why? It can save you a ton of money!