How does the mileage deduction work?

February 26, 2007

Date:  Sun, 31 Dec 2006
From:  Brett

Michael,

I get $600 per month car allowance. How many cents per dollar does the IRS match? I thought it was around 35ยข per mile.

Thank you,
Brett Salisbury

Answer

Date:  Wed, 31 Jan 2007

Hello Brett,

The IRS doesn't "match" a car allowance. The standard mileage rate for business miles you can account for is 44.5¢ per mile for 2006 and 48.5¢ per mile for 2007.

Car allowances are non-accountable plans, includable in an employee's income and for which employment taxes are computed. The employee claims a miscellaneous itemized deduction for employee business expenses on Form 2106. Two percent of adjusted gross income is subtracted from most miscellaneous itemized deductions, and they are not deductible when computing the alternative minimum tax.

Good luck!
Mike Gray

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