Guidance and Knowledge for Value Investors
Cost per mile is a formula incorporating fixed and variable costs to determine the actual cost per mile to operate a vehicle or work truck. Each of the individual elements of fixed and variable are determined separately and then added together within the sub grouping of costs (fixed and variable). Fixed costs use and estimated number of miles driven within the accounting period, whereas variable costs use actual number of miles driven to determine its cost per mile. Combine the two cost groups to determine the final cost per mile.
On December 10, 2014, the Internal Revenue Service announced the mileage rate deduction for 2015. They increased the amount allowed 1.5 cents to 57.5 cents per mile. How do you calculate and use the mileage rate formula for tax purposes?
In any industry, especially transportation, it is essential for the owner of a business to understand how much it costs per mile to operate his vehicle, trucks or fleet. The formula looks simple and in reality it is; but you must understand the underlying elements to truly appreciate and comprehend the calculation.