There's a Downside to Almost Everything

What could be bad about paying a about a dollar a gallon less at the pump to fill up your tank? There is a downside to falling fuel prices, although you probably won’t feel it until next April 15, when you fill out your income tax return for 2010. The IRS recently released its standard mileage rate for calculating the write-off for business use of your car in 2010, and it’s significantly lower than in 2009.

When you write off the cost of using your car for business, you can either keep meticulous records of gasoline purchases and maintenance costs, or use the IRS standard rates. Most taxpayers choose the latter, because it’s simpler and saves a lot of time, effort, and paperwork. Starting January 1, the standard rate for business mileage drops to 50¢ a mile, down from 55¢ in 2009. The lower rate, which is based on an annual study of the fixed and variable costs of owning and operating a car, reflects the steep drop in gasoline costs during the year.

The IRS also allows taxpayers to deduct the cost of driving for medical purposes or when moving. That mileage rate drops to 16.5¢ a mile in 2010, down from 20¢ in 2009. The deduction for charitable use of your care, however, stays the same at 14¢ a mile. That rate is set by law and the IRS can’t change it. You’re not entirely free of record-keeping with any of these deductions — you need to keep track of mileage and, if you’re ever audited, the more detailed your records are, the better off you’ll be.