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Standard business mileage rate will rise to 56.5 cents in 2013; certain depreciation-limits also projected to rise

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The IRS has released the 2013 optional standard mileage rates that employees, self-employed individuals, and other taxpayers can use to compute deductible costs of operating automobiles (including vans, pickups and panel trucks) for business, medical, moving and charitable purposes.

Standard mileage rates

The 2013 standard mileage rate is increased to 56.5 cents per mile for business uses and 24 cents per mile for medical and moving uses. It remains at 14 cents per mile for charitable uses.

For purposes of computing the allowance under an FAVR (fixed and variable rate) plan, the standard automobile cost may not exceed $28,100 ($29,900 for trucks and vans). The updated rates are effective for deductible transportation expenses paid or incurred on or after January 1, 2013, and for mileage allowances or reimbursements paid to, or transportation expenses paid or incurred by, an employee or a charitable volunteer on or after January 1, 2013.

2013 vehicle depreciation caps

Based on inflation factors now available, CCH has projected the annual “luxury auto cap” figures for use in connection with vehicles first placed in service in calendar year 2013. For passenger automobiles placed in service in 2013, these limitations will be:

  • $3,160 for the first year, the same as in 2012 ($11,160 if Congress extends bonus depreciation into 2013);
  • $5,100 for the second tax year, the same as for 2012;
  • $3,050 for the third tax year, the same as for 2012; and
  • $1,875 for each tax year thereafter, the same as for 2012.

Comment.  If you are planning on a business-related vehicle purchase in the near future, you may want to consider acting quickly by purchasing the vehicle and placing it in service before December 31, 2012. Even if Congress does not extend bonus depreciation into 2013, you will still have locked in the higher deduction of up to $11,160 for your 2012 tax year return. Wait until January, and you may be able to deduct only $3,160 for 2013.

Trucks and vans

The projected maximum depreciation limits under Code Sec. 280F for trucks and vans first placed in service during the 2013 calendar year are:

  • $3,360 for 2013, same as in 2012 ($11,360 if Congress extends bonus depreciation into 2013);
  • $5,400 for the second tax year, up from $5,300 for 2012;
  • $3,250 for the third tax year, up from $3,150 for 2012; and
  • $1,975 for each tax year thereafter, up from $1,875 for 2012.

(Trucks and vans are defined as passenger automobiles built on a truck chassis, including minivans and sport utility vehicles built on a truck chassis.)

Cents-per-mile valuation

One permitted method that an employer can use to value the personal use of an employer-provided automobile is the standard mileage allowance rate (which for 2013 will be 56.5 cents-per-mile for business-related travel, as explained).  However, this cents-per-mile method may be used only if the vehicle’s FMV does not exceed certain amounts. The maximum FMVs for use of the vehicle cents-per-mile valuation rule in 2013, as projected, will be:

  • $16,000 for a passenger automobile (up from $15,900 in 2012); and
  • $17,000 for a truck or van, which includes minivans and SUVs built on a truck chassis (up from $16,700 in 2012).

The rules surrounding bonus depreciation can be confusing, especially in light of the scheduled expiration at the end of 2012. If you have questions or would like an update, please call our offices.