The Internal Revenue Service calculates the standard mileage rate based on a yearly study of how much it costs to operate a vehicle. If a person is using a vehicle for medical or moving purposes, the mileage rate is only based on variable costs.Continue Reading
The fixed and variable expense categories used to determine the mileage rate are calculated differently. The variable expenses are calculated using the average cost of driving a vehicle. Gas usage, maintenance and repair are all fluctuating factors that are used to determine the variable portion of the mileage rate.
Fixed expenses are calculated using the one-time or once-yearly costs associated with operating a vehicle. These expenses include such items as insurance, inspection and the cost of purchasing the vehicle.
The IRS does not release the exact formula it uses to determine the official mileage rate. The rate is, however, calculated using a combination of both fixed and variable expenses. The IRS releases the flat rate for mileage annually so people can use it for tax purposes.
Although it can be difficult, a person does not have to use the flat mileage rate provided by the IRS. Taxpayers have the option of calculating the actual cost of using a car for business, medical visits and moving purposes and deducting that cost instead.Learn more about Taxes