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Update: For rates taking effect on Jan. 1, 2017, see the SHRM Online article "For 2017, Standard Mileage Rate for Business Deductions Falls Slightly."
Plunging gas prices mean that for 2016, the standard mileage rate used to calculate the deductible costs of operating an automobile for business purposes will be lower—dropping by 3.5 cents per mile.
The Internal Revenue Service (IRS) on Dec. 17 issued its 2016 optional standard mileage rates. Beginning on Jan. 1, 2016, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
• 54 cents per mile for business miles driven, down from 57.5 cents for 2015.
• 19 cents per mile driven for medical or moving purposes, down from 23 cents.
• 14 cents per mile driven in service of charitable organizations, as set by statute.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, the IRS said in a news release. Taxpayers have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
However, a taxpayer may not 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. Also, the business standard mileage rate cannot be used for more than four vehicles simultaneously. These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business expense are found in
Revenue Procedure 2010-51.
Notice 2016-01 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to the cost basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate (FAVR) plan.
For computing the allowance under a FAVR plan, in 2016 the standard automobile cost may not exceed $28,000 for automobiles or $31,000 for trucks and vans.
Stephen Miller, CEBS, is an online editor/manager for SHRM.
Follow me on Twitter.
Related SHRM Article:
Do we have to reimburse personal auto mileage for business-related trips?, HR Q&As, December 2012
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