If you use your car for things that are usually tax deductible, you're not going to like this.
The Internal Revenue Service (IRS) is cutting the 2016 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical, or moving purposes.
Starting January 1, the standard mileage rates for the use of a car (also vans, pickups, or panel trucks) will be:
- 54 cents per mile for business miles driven -- down 3.5 cents from 2015.
- 19 cents per mile driven for medical or moving purposes -- down four cents from 2015.
- 14 cents per mile driven in service of charitable organizations. The charitable rate is based on statute.
According to the tax agency, the standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
You have options
Keep in mind, though, that you always have the option of calculating the actual costs of using your vehicle rather than using the standard mileage rates.
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 for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51.
Notice 2016-01 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.