For anyone who has to use their vehicle for ‘business” they know that keeping track of their mileage is very important for tax reasons, especially if they rack up a lot of extra miles. While the IRS does not allow anyone to deduct their commute to and from work, there are other times when taxpayers are asked to use their private vehicles for so called business purposes. Those can be for work, medical purposes, and charitable reasons or for moving. Each year the IRS establishes the mileage rates for the coming year and the agency just announced the 2017 business mileage rates. The news is not terrific, but it’s not terrible, either.
Rates Go Down for Next Year
If you use your vehicle (cars, vans, pickups or panel trucks) for any business-related purpose you will want to take notice as this is how much you will be able to deduct for each business mile you accrue for business, charitable, moving or medical purposes. Beginning January 1, 2017 the rates are as follows:
• 53.5 cents per mile for business miles driven, down from 54 cents for 2016
• 17 cents per mile driven for moving purposes, down from 19 cents for 2016
• 17 cents per mile driven for medical purposes, down from 19 cents for 2016
• 14 cents per mile driven in service of charitable organizations
Downward Trend Continues
The drop continues a downward trend over the past few years as the business mileage rate has now dropped 3.5 cents in the last two years. In 2015 the rate was 57.5 cents a mile. One of the causes of the decline is the drop in gas prices. Meantime, the business mileage rate is not the only rate that has seen a dip recently. The medical and moving rates are both down from 23 cents just two years ago in 2015. The charitable rate, however, remains the same at 14 cents, as it has been fixed at that level since 1997 and does not change.
Actual Costs vs. Standard Deduction
The IRS determines the business mileage rates based on all the different factors and costs of owning a vehicle, including repairs and insurance, as well as the costs for gas and oil. Of course, you do not have to take the standard deduction rates for any of these uses, but if you choose to claim your deductions based on the actual amount of money you spent using your vehicle for business purposes then you will definitely need to keep detailed records of all your vehicle expenditures. One other important factor to keep in mind is that you are not allowed to “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.” Lastly, taxpayers are not allowed to use the business standard mileage rate for more than four vehicles at the same time.
Visit IRS.gov to Learn More
For more information regarding the IRS’s announcement, including the amount a taxpayer must use in calculating reductions to 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 plan, you can click here. So there you have it. If you are someone who racks up a lot of miles on your vehicle for business use, these deductions can really add up when it comes time to file your tax return. So keep close track of every mile and earn every penny you deserve.