The IRS announced that the standard mileage rate will increase to 55.5 cents per business mile driven, effective July 1, 2011. That is a jump of approximately 9% over the 51 cents allowed for the first part of 2011. According to the IRS, the primary reason for the rate hike is higher gasoline prices.

When you use your car for business, driving between job sites is deductible. So is driving between your home and a temporary job site, job interviews, and conferences. Commuting between your home and a regular place of business generally isn’t tax deductible.

There are two ways for you to calculate your automobile expenses. You can either multiply the total business miles driven during the year with the applicable rate of $.555 for the last six months or $.51 for the first six months, or you can base your deduction on the percentage of miles your car was driven for business multiplied by actual costs incurred. Allowable costs include gas, insurance, repairs, parking at home, and either your lease payments, or if you own your car, a factor for depreciation.

Generally, unless you drive your car relatively few miles each year, with most of those miles being allowable business miles, you’re better off basing your deduction on the standard mileage rate.

Other Deductible Miles

Any mileage driven in connection with a qualified move is deductible at a rate of 23.5 cents per mile effective July 1, 2011, up from 19 cents per mile for the first part of the year, and should be reported on a Form 3903, Moving Expenses. Medical mileage is deductible at the same rates, and should be reported with all other medical expenses on the Schedule A.

The standard mileage rate for using your automobile in connection with a charitable activity did not increase and remains at 14 cents per mile. Make sure to report these miles with other charitable contributions as an itemized deduction of the Schedule A.