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Lower gas prices nationwide results in lower mileage reimbursement rates

Business mileage rates–how much you can deduct if you use a car for business purposes–are dropping for 2016. The IRS announced on Thursday the standard mileage rates for taxpayers to use in calculating the deductible costs of using a car for business, charitable, medical or moving purposes:

* Business use: 54 cents per mile (compared with 57.5 cents in 2015)

* Medical or moving purposes: 19 cents per mile (down from 23 cents for 2015)

The rate for service to a charitable organization is set by statute and has been fixed at 14 cents a mile since 1997.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. The business standard mileage rate cannot be used for more than four vehicles used simultaneously.

The standard mileage rate for business is calculated using an annual study of the fixed and variable costs of operating an automobile, including gas, oil, depreciation, maintenance, insurance and repairs, while the rate for medical and moving purposes is based on the variable costs, such as gas and oil.

View the detailed IRS notice here.