The IRS 2016 Mileage Rates Announced – A Gift for the New Year?
On Thursday December 17th, the Internal Revenue Service issued the standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes for 2016.
Beginning on Jan. 1, 2016, the standard mileage rates for the use of a car, 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 in service of charitable organizations
The business mileage rate decreased 3.5 cents per mile and the medical and moving expense rates decrease 4 cents per mile from the 2015 rates. The charitable rate is based on statute and has been unchanged since 1997.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile including depreciation, insurance, repairs, tires, maintenance, gas and oil while the rate for medical and moving purposes is based on the variable costs, such as gas and oil. According to AAA, U.S. drivers are paying the lowest average price for regular unleaded gasoline since 2009.
But, perhaps there is a silver lining. Although the standard mileage rate has declined, the cost of operating a vehicle may have dropped more than the deduction due to the dramatic drop in the price at the pump.
While the business mileage rate dropped 17% and the moving and medical rate dropped 6%, the average price per gallon of gasoline dropped 28% from 2014 and is expected to remain lower for the foreseeable future. However, if you think you can do a better job than the IRS on calculating the cost of operating a vehicle, the IRS allows taxpayers the option of calculating the actual costs of operating a vehicle rather than using the standard mileage rates.
For more detailed rules and information on the standard mileage deduction visit the IRS website: https://www.irs.gov/publications/p521/ar02.html
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