2006 Standard Mileage Rates

The 2006 optional standard mileage rates — which are used by employees, self- employed individuals, and other taxpayers who need to compute the deductible costs of operating an automobile (including vans, pickups or panel trucks) that they own or lease for business purposes — have been established for tax year 2006. Different rates are also used to compute the deductible costs of operating automobiles for charitable, medical or moving expenses.

The new rates apply to automobile costs incurred after January 1, 2006 and are as follows:

• For transportation expenses incurred for business purposes, the standard mileage rate is 44.5 cents per mile, up from 40.5 cents for the first eight months of 2005.

The standard mileage rate for use of your car for medical reasons is 18 cents per mile, up from 15 cents for the majority of months in 2005.

• For an automobile used to provide free services to a charitable organization, other than activities related to Hurricane Katrina relief, the standard mileage rate remains 14 cents per mile, as established by statute.

• The standard mileage rate to use when computing deductible moving expenses is 18 cents per mile, up from 15 cents for the majority of months in 2005.

• For 2006, Katrina-related charitable rates will be 32 cents per mile for deduction purposes and 44.5 cents per mile for reimbursement purposes.

The standard mileage rate is provided by the IRS as a convenience to taxpayers. You still have the option to calculate your actual costs instead of using the standard mileage rate. However, special rules apply when changing between the two methods. Although the standard mileage rate includes most expenses associated with an automobile, you can still also deduct parking fees, tolls, interest payments on the car, and any property taxes associated with your automobile.