Tax Tip of the Week
For the week of January 12, 2004

Mileage allowances and hybrid cars could affect your taxes

Mileage rates increase. The standard mileage rates have increased for 2004, and more taxpayers can now use them. The standard mileage rate allows you to claim a fixed amount per mile, rather than keeping track of actual expenses for gas, repairs, service, etc.

The new rates for 2004 are:

• 37.5 cents a mile for business use (up from 36 cents in 2003).
    
• 14 cents a mile for miles driven for charitable work (no change from 2003).
    
• 14 cents a mile for medical appointments or moving expenses (up from 12 cents in 2003).

Until now, you could not use the standard rate for business miles if you used more than one vehicle for business purposes. Beginning in 2004, you can use up to four vehicles and still claim the standard mileage rate. There are some other limitations on when you can use the standard rate though, so check with our office for details. And don't forget that you need to keep a log of business use, showing dates, business purpose, and miles driven.

Hybrid vehicles eligible for tax credit. Individual taxpayers are eligible for a tax deduction of up to $2,000 if they buy an IRS-certified hybrid vehicle. A hybrid combines a gasoline engine and an electrical motor to obtain higher gas mileage and lower emissions. The IRS recently certified the 2004 Toyota Prius, joining the 2001-2003 models. Other certified hybrids include the 2000-2002 Honda Insight and the 2003 Honda Civic Hybrid.

You claim the deduction in the year in which the car is originally used. The deduction was $2,000 through 2003 and will be $1,500 for 2004.

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