Are you familiar with the new optional standard mileage rates?
New rates used to calculate the deductible costs of operating an automobile for business, medical and moving purposes went into effect Jan. 1, according to the IRS. To reflect lower gasoline prices, standard mileage rates for the use of cars, vans, pickups and/or panel trucks) have been set at:
- 54 cents per mile for business miles driven, down from 57.5 cents in 2015
- 19 cents per mile driven for medical or moving purposes, down from 23 cents in 2015
The standard mileage rate for business is determined based on a yearly review of fixed and variable costs of operating a vehicle, including gasoline, insurance, depreciation, tires, repair and maintenance. The rate for medical and moving purposes is based only on variable costs, such as gas and oil. Gasoline prices are at their lowest average level since 2009, according to travel-services company AAA, which monitors gas prices. They are expected to remain low for much of 2016.
The rate used to calculate the deductible costs of operating an automobile in service of charitable organizations remains the same as this past year at 14 cents per mile. The rate is determined by Congress and is unaffected by the cost of gasoline.
Although many taxpayers use the standard mileage rates, taxpayers also have the option of calculating the actual costs of using their vehicle for business, charitable, medical or moving purposes. Determining which option is right for you, your business or both can be challenging. And in some situations, the standard mileage rate is not an option. That’s why professional tax advice is so important.