Mileage Rates for 2014

If you drive a car, truck or van for work, you’ll want to make sure you know standard mileage rates the Internal Revenue Service (IRS) has set for 2014.

These mileage rates are used to calculate deductible costs for driving an automobile for business, charitable, medical and moving purposes. So when it comes to filing your taxes this year, you’ll need these numbers!

New for 2014
As of January 1, 2014, the standard mileage rates are as follows:

  • Businesses = 56 cents per mile driven
  • Medical or moving = 23.5 cents per mile driven
  • Charitable organizations = 14 cents per mile driven

You’ll notice that the rates for business, medical and moving expenses decreased one-half cent from the 2013 rates.

Make Sure You Qualify
Before you calculate your deduction, make sure you qualify. The IRS reminds taxpayers that they cannot use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

Additional Option
Although the IRS provides the standard mileage rate for ease and convenience, you’re not required to use it. If you prefer, you can calculate the actual costs of using your vehicle instead of using the standard mileage rates.

Income Add-back for Mileage
It’s important to know a portion of the mileage can be added back to your income.  See our page outlining the details of how Using Automobile Mileage as Income.

 

 

Mileage Deductions

Automobile mileage deductions can appear on the 2106 and/or Schedule A of your federal tax return.  On the Schedule A they appear as unreimbursed business expenses that are carried over from the 2016. In the mortgage world, these expenses must be deducted from your qualifying income, with one exception.

The “standard mileage rate” for the business miles used by an automobile includes depreciation; therefore, if you claim a “standard mileage” deduction then the business miles driven can be multiplied by the depreciation factor for the appropriate year and that can be added back to your income. Ex: 20,000 business miles driving in 2013 means you can multiply 20,000 x $.23 = $4,600 that can be added back as income.

The Rate of Depreciation Allowed in Standard Mileage Rate per the IRS is:

2013 = $.23
2012 = $.23
2011 = $.22
2010 = $.23
2009 = $.21
2008 = $.21
2007 = $.19

The Standard Mileage Rates for 2013 are as follows:

 

 

When and what types of Income Allowances are allowed with Fannie Mae.

Automobile Allowance:

For an automobile allowance to be considered as acceptable stable income, the borrower must have received payments for at least two years. The lender must include all associated business expenditures in its calculation of the borrower’s total DTI ratio.

There are two methods for calculating the income associated with an automobile allowance:

Actual cash flow approach:

  • If the borrower reports automobile allowances on Employee Business Expenses (IRS Form 2106) or IRS Form 1040, Schedule C
  • funds in excess of the borrower’s monthly expenditures are added to the borrower’s monthly income, or
  • expenses in excess of the monthly allowance are included in the borrower’s total monthly obligations.

If the borrower used IRS Form 2106 and recognized “actual expenses” instead of the “standard mileage rate,” the lender must look at the “actual expenses” section to identify the borrower’s actual lease payments and make appropriate adjustments.

Income and debt approach:

  • If the borrower does not report the allowance on either Form 2106 or Schedule C, the full amount of the allowance is added to the borrower’s monthly income, and the full amount of the lease or financing expenditure for the automobile is added to the borrower’s total monthly obligations.

Housing Allowance:

Housing or parsonage income may be considered qualifying income if there is documentation that the income has been received for the most recent 12 months and the allowance is likely to continue for the next three years. The housing allowance may be added to income but may not be used to offset the monthly housing payment.  Note: This requirement does not apply to military quarters’ allowance.

Military Income Allowance:

Military personnel may be entitled to different types of pay in addition to their base pay. Flight or hazard pay, rations, clothing allowance, quarters’ allowance, and proficiency pay are acceptable sources of stable income, as long as the lender can establish that the particular source of income will continue to be received in the future.

Military base pay, clothes allowance, combat pay, flight pay, hazard pay, overseas pay, prop pay, quarters allowance, rations allowance, variable housing allowance. (All military income can be combined and entered as Base Income in Section V for conventional loans.)

Income Allowances (FNMA)

When and what types of Income Allowances are allowed with Fannie Mae.

-Automobile Allowance:

For an automobile allowance to be considered as acceptable stable income, the borrower must have received payments for at least two years. The lender must include all associated business expenditures in its calculation of the borrower’s total DTI ratio.

There are two methods for calculating the income associated with an automobile allowance:

Actual cash flow approach:

  • If the borrower reports automobile allowances on Employee Business Expenses (IRS Form 2106) or IRS Form 1040, Schedule C
  • funds in excess of the borrower’s monthly expenditures are added to the borrower’s monthly income, or
  • expenses in excess of the monthly allowance are included in the borrower’s total monthly obligations.

If the borrower used IRS Form 2106 and recognized “actual expenses” instead of the “standard mileage rate,” the lender must look at the “actual expenses” section to identify the borrower’s actual lease payments and make appropriate adjustments.

Income and debt approach:

  • If the borrower does not report the allowance on either Form 2106 or Schedule C, the full amount of the allowance is added to the borrower’s monthly income, and the full amount of the lease or financing expenditure for the automobile is added to the borrower’s total monthly obligations.

-Housing Allowance:

Housing or parsonage income may be considered qualifying income if there is documentation that the income has been received for the most recent 12 months and the allowance is likely to continue for the next three years. The housing allowance may be added to income but may not be used to offset the monthly housing payment.  Note: This requirement does not apply to military quarters’ allowance.

-Military Income Allowance:

Military personnel may be entitled to different types of pay in addition to their base pay. Flight or hazard pay, rations, clothing allowance, quarters’ allowance, and proficiency pay are acceptable sources of stable income, as long as the lender can establish that the particular source of income will continue to be received in the future.

Military base pay, clothes allowance, combat pay, flight pay, hazard pay, overseas pay, prop pay, quarters allowance, rations allowance, variable housing allowance. (All military income can be combined and entered as Base Income in Section V for conventional loans.)

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