Independent business people who use their cars for business travel can deduct actual expenses, a category that includes gas, repairs, license tags, registration fees, and depreciation. Or they have the option to claim a standard mileage rate that is adjusted each year to reflect inflation. The optional standard rate’s advantage is that it eliminates the extra burden of tracking actual costs; records need to be kept only of business miles driven for the year in question.

While gas cost is a major factor in arriving at the standard rate figure, the IRS also considers other items, such as insurance and the price of new vehicles. Just to be clear, the IRS defines "cars" to include vans, pickups or panel trucks.

For 2006, the standard rate is 44.5 cents per mile. For 2005, it is 48.5 cents per mile for the final four months and 40.5 cents per mile for the first eight months. The special increase to 48.5 from 40.5 reflected the surge in gasoline prices caused by Hurricane Katrina.

The standard mileage rate is a benchmark used by the federal and state governments and many employers to reimburse employees for their mileage. Employees can deduct actual expenses that exceed reimbursements.

People who need medical care and drive to and from doctors, clinics, hospitals and the like are also able to deduct actual costs of gas and oil or a standard rate. The rate is 18 cents per mile for 2006, 22 cents a mile for the final four months of 2005 and 15 cents a mile for the first eight months of 2005.

Individuals who move for job-related reasons and use their cars to transport themselves, members of their households, or their belongings, can deduct actual costs of gas and oil or a standard mileage rate that is the same as the one for medical driving – 18, 22 and 15 cents, for 2006, the final four months of 2005, and the first eight months of 2005, respectively.

Costs of Gas and Oil

Persons who use their cars to perform services for such charitable organizations as schools and religious institutions, can deduct actual costs of gas and oil or a standard mileage rate. The rate is 14 cents for 2006 and 2005, a rate fixed by law.

There is an exception for charity work related to Hurricane Katrina. The standard rate for deduction purposes is 32 cents for 2006, 34 cents for the final four months of 2005 and 29 cents for August 25 through August 31 of 2005. The standard rate for reimbursement purposes is 44.5 cents for 2006, 48.5 cents for the final four months of 2005 and 40.5 cents for August 25 through August 31 of 2005.

Besides claiming mileage allowances, remember to take separate deductions for parking fees, as well as bridge, tunnel and turnpike tolls. And drive within speed limits. The tax collectors refuse to go along with deductions for traffic tickets even if, say, you were on the way to teach Sunday school or racing the stork to the hospital.

If the IRS audits your return and questions car expenses, it will not challenge standard-rate deductions, provided you are able to substantiate the miles driven; actual expenses are disregarded. So it is advisable to keep a glove-compartment diary or other record in which you list the details of when, how far, and why you went, along with the cost of parking and tolls.

Julian Block, attorney and syndicated columnist, teaches a continuing ed course called "Tax Tips For Freelance Writers, Photographers And Artists." The New School in New York City and several colleges in neighboring Westchester County will offer the one-session course. For more information, contact Julian at julianblock@yahoo.com.

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