Drivers were able to get a little more money back for every mile driven in 2015, but next year’s road map tells a different story.
The IRS announced that most of the 2016 optimal standard mileage rates would either remain the same or would be lowered going in to 2016. Among the rates seeing a decrease, were the standard mileage rates for business use of a vehicle, which were reduced to 54 cents per mile – a decrease of 3.5 cents over 2015’s rate of 57.5 cents per mile.
Based on a study of the fixed and variable costs associated with operating an automobile, the standard mileage rates take into consideration vehicle depreciation, insurance, repairs, maintenance, gas, etc. However, if you don’t intend on tracking your mileage, you also have the option of claiming deductions based on the actual costs of using your own vehicle rather than the standard mileage rates. Just be aware that you will not be allowed to claim both.
For example, if you have plans of claiming an accelerated depreciation on your vehicle, then you will not be able to claim the business standard mileage rate as well. If you are a business owner, you should also note that the standard rate is not available to fleet owners, or those who use more than four vehicles simultaneously. Additional details and rules can be found in Revenue Procedure 2010-51.
Different Rules For Different Road Trips
Here are some of the other common rates drivers should be aware of:
- The miles you drive for medical or moving purposes will be calculated at 19 cents per mile driven.
- Those driving their vehicles as a service to charitable organizations may calculate their deductions at 14 cents per mile driven.
- The portion of your business standard mileage rate that will receive depreciation treatment in 2016 will continue to be 24 cents.
Also in its announcement, the IRS noted an adjustment to the standard automobile cost allowable under the fixed and variable rate (FAVR) plan, which considers the costs taxpayers incur by driving their own vehicles for work-related purposes. In 2015, standard automobile costs may not exceed $28,000 (not including trucks and vans), which is a decrease of $200 from 2015. The maximum standard automobile cost for trucks and vans, however, is $31,000 – an increase of $200 over the 2015 rates).
Travel For Tax Savings
If you use your vehicle for business don’t forget to track your mileage. Every mile you travel is an opportunity to realize real tax savings. A financial advisor can help you find these opportunities as well as many others.
By Lesley Mast, CPA (Wooster office)