A few weeks ago, the IRS issued the 2016 standard mileage rates used in calculating the deductible costs of using a car for business, charitable, medical or moving purposes.
Effective January 1, 2016, the standard mileage rate for the use of a car (including vans, pickups or panel trucks) will be 54 cents per mile for business miles driven, a 3.5 cent decrease from the 2015 rate. The medical and moving use 2016 mileage rates also changed to 19 cents per mile, a 4 cent decrease from the 2015 rate. The charitable use rate remains at 14 cents per mile, which has been fixed since 1997.
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. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the 2016 standard mileage rates.
When NOT to Use the 2016 Standard Mileage Rates
The business standard mileage rate should not be used for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery Systems (MACRS) or after claiming a Section 179 deduction for the vehicle. Additionally, the standard mileage rate cannot be used for more than four vehicles simultaneously.
To read about these requirements, please refer to the official IRS regulation in Rev. Proc. 2010-51. Notice 2016-01 contains the updated 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.