United States

IRS standard mileage rates going down for 2016

TAX ALERT  | 

On Dec. 17, 2015, the IRS announced the 2016 standard mileage rates that taxpayers may use in calculating the deductible costs of using an automobile for business, charitable, medical or moving purposes.

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 for 2015
  • 14 cents per mile driven for service of charitable organizations

The business expense rates are based on IRS’s estimate of the actual total costs of operating a car for business, while the rates for medical and moving purposes are based primarily on variable costs such as gasoline prices. The charitable mileage rate is statutory and thus remains unchanged from 2015.

The standard mileage rates are often the simplest option for taxpayers to use and are particularly helpful for businesses that reimburse employees for mileage expenses. The alternative is to compute and claim deductions on the basis of taxpayer’s actual costs of using a vehicle.

Irrespective of whether taxpayers choose the standard mileage rates or the actual cost method, taxpayers need to keep records to prove how far they drove and when and for what purpose.

The notice also reminds taxpayers that they cannot use the business standard mileage rate for a vehicle if they have claimed accelerated depreciation (including the section 179 expense deduction) on that vehicle.

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