The Internal Revenue Service scrutinizes expenses that can and often are benefits to owners. The most common benefit is the use of a company owned car for personal travel including using the car to get to and from work. Owners would love to have this cost of travel paid by the company and deductible for tax purposes.
IRS Mileage Rate
The Internal Revenue Service set the mileage deduction rate at 56.5 cents for calendar year 2013. This is a 1 cent increase over 2012. The IRS mileage rate changes from year to year, typically a few pennies per mile driven.
Some small businesses manage transportation costs in incremental payments by utilizing mileage reimbursement. It is a very advantageous system if used correctly. Other small businesses augment their existing vehicle fleet by paying employees via mileage reimbursement for the use of the employee’s automobile.
One of the more significant expenses for the small business owners is income taxes. Since most small businesses are tax pass through entities, it is beneficial to the business to have the least amount of net income in order to reduce the tax obligations of the owner(s). This is achieved by making sure every dollar expensed is deductible 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.