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TAX TALK: IRS Reduces the Optional Standard Mileage Rate for 2017

Hal Zemel, CPA, J.D., LL.M. 12.19.2016 | TAX TALK

Due to lower gas prices, the IRS has lowered the optional standard mileage rates for 2017. The IRS has issued the 2017 optional standard mileage rates to calculate the deductible costs of operating an automobile for business, charitable, medical, or moving purposes.

Beginning January 1, 2017 standard mileage rates for the use of a car, van, pickup or panel truck will be:

  • 53.5 cents per mile for business miles driven, down from 54 cents for 2016;
  • 17 cents per mile driven for medical or moving purposes, down from 19 cents for 2016;
  • 14 cents per mile driven in service of charitable organizations.

The business mileage rate decreased half a cent per mile and the medical and moving expense rates each dropped 2 cents per mile from 2016. The charitable rate is set by statute and remains unchanged.

Standard Mile v. Actual Expenses
With the standard mileage rate, you take a mileage deduction for a specified number of cents for every business mile you drive. The IRS sets the standard mileage rate each year. The standard mileage rate requires you keep track of how many miles you drive for business and the total miles you drive. You also need the date of the trip, your business destination, and business purpose.

Instead of using the standard mileage rate, you can deduct the actual cost of using your car for business, plus depreciation. Deductible costs include:

  • gas and oil;
  • repairs and maintenance;
  • depreciation of your original vehicle and improvements;
  • car repair tools;
  • license fees;
  • parking fees for business trips;
  • registration fees;
  • tires;
  • insurance;
  • car washing;
  • lease payments;
  • towing charges, and
  • auto club dues.

The best method for you depends on the facts and circumstances, and there is no easy answer. Either method requires you to maintain good contemporaneous records to capture the information required in a timely fashion. However, there is substantially less record keeping required for the standard mileage method.

A taxpayer may not 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. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements are in Rev. Proc. 2010-51. Notice 2016-79 contains the standard mileage rates, 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.

If you use your personal auto for business purposes, contact me at HZemel@BerdonLLP.com or your Berdon advisor us for ideas on how you can maximize your deductions.

Hal Zemel, a Tax Principal at Berdon LLP, New York Accountants, has more than 20 years in public accounting and advises businesses in the real estate, service, and manufacturing sectors.

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