The Master's Tax & Financial Services
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2006 Mileage Rates

The IRS has just released the mileage rates for use in 2006. They took extra time and effort to establish the rates given the high and fluctuating price of gasoline. Here are the rates excluding Katrina efforts:

  • 44.5 cents for business miles driven
  • 18 cents for miles driven for medical or moving pruposes
  • 14 cents for miles drive in service of charitable organizations (set by Congress)

For 2006 mileage related to Katrina relief efforts the rate will be 32 cents per mile for deduction purposes and 44.5 cents per mile for reimbursement purposes. (Reference to Revenue procedure 2005-78.)

The standard way of treating auto expenses is to track all expenses, figure depreciation on the vehicle, and then prorate those according to use. Frankly such is a pain to do! So an Optional Method was established that allows a taxpayer to simply calculate a certain amount per mile driven. (Mileage records must be kept anyway, since those would be used to prorate the expense.) The standard mileage ("Optional Method") takes into account operating expenses such as gas, oil, tires, plus repairs and depreciation, and also insurance. So when using this method none of those other items may be added.

It is important to emphasize that "contemporaneous" mileage records must be kept. (That means keeping them as they are incurred - not making them up for the year at tax time.) This does not necessarily mean writing down odometer readings all the time. We would be happy to discuss your personal situation and explore a way to keep the required records in the least intrusive manner.

"Tax software is no substitute for tax knowledge."

Any views expressed herein are based on our best information. The content of this web site was written as general information without specific individual information and thus may not apply in all situations. This material was not written, and cannot be used by the taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.

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Janelle Ogg, EA
Richard Ogg, EA