In other words, this amount is an allowable business deduction for a tax payer each year. The taxpayer is entitled to either use the actual expense for deduction or deduct the amount obtained by using the Standard Mileage rate, whichever is greater. Standard Mileage Rate is issued by Internal Revenue Service. This rate is calculated on the basis of the fixed and variable costs involved in operating an automobile.
The Standard Mileage Rate for the year 2013 are as follows :
56.5 cents per mile for business miles driven.
24 cents per mile driven for medical or moving purposes.
14 cents per mile driven in service of charitable organizations.
Formula: Distance travelled for business purpose in miles x Standard Mileage Rate
Eg – If an employee incurs $550 on 1000 miles driven for business purpose, then he can either claim $550 for reimbursement or his reimbursement amount can be