Tax payments are our contribution to the national revenue. Taxation is tolerable, when it's reasonable and in proportion to every individual's earning. Designing of an elaborate taxation system is one of the prime tasks of a government. Tax deductions help reduce the burden of taxation by allowing for reimbursement on certain expenses and investments made by any citizen. In USA, the federal department, which oversees the taxation system and collection of revenue is the Internal Revenue Service (IRS).
About Mileage Rates
The travel related IRS mileage reimbursement rate updates are the most awaited every year, as they form a sizable component of tax deductions. With the price of crude oil rising every year, the price of gasoline is always on an ascending curve. For most business owners, travel related costs are quite high and if it weren't for the tax deductions allowed for the clocked business miles, the burden would be quite heavy. The IRS decides the mileage reimbursement rates according to the current costs of gasoline and the condition of the economy as a whole.
Allowing for such tax deductions is one way of encouraging business to prosper and provide better services. Because of the mercurial nature of the crude oil market in the decade that went by, the IRS mileage reimbursement rates offered have also fluctuated substantially.
Eligibility Conditions For Claiming Business Travel Related Reimbursement
There are a couple of rules that you must know about when calculating your business travel related tax deductions. As you might already know, you may either claim a tax deduction, based on a record of actual travel expenses or use the mileage rates. You can opt for the latter option, if you haven't opted for a deduction under Modified Accelerated Cost Recovery System (MACRS).
If you have opted for a tax deduction under section 179 of the federal tax code, you cannot claim any more deductions on travel expenses. Also you can claim mileage rate based deductions for business travel on a maximum of four vehicles only, which are in use simultaneously.
Business Mileage Rate For 2012
According to the recent update, the mileage rate for business related travel, effective from 1 January, 2012 is 55.5 cents. Another change in the IRS mileage reimbursement rules, implemented in 2011 itself, is permission to use the mileage rate for business, to claim expenses on business travel in hired vehicles, including taxicabs. This change can help a lot of businesses, who use hired vehicles frequently.
Other than this, the 2012 mileage rate for moving and medical related travel is 23 cents. For charity related travel, you can claim 14 cents per mile, when calculating tax deductions. It's essential that you carefully maintain records of your business travel, all over the year, if you want to be in a position to claim deductions.
As discussed before the mileage rate for business travel has been raised by a cent, besides allowing for inclusion of hired vehicle travel costs, which is a big change indeed. To conclude, in the year 2012, you can be reimbursed by 55.5 cents for every mile of business related travel.
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