The IRS has announced the standard mileage rate for 2016. The mileage rate 2016 for business driving will be 54 cents per mile. This is down from 57.5 cents per mile in 2015.
The standard mileage rate 2016 for medical related driving and tax deductible moving will be 19 cents per mile. This is also a 3.5 cents per mile reduction from 2015. The standard rate for charity related driving stays at 14 cents per mile. This rate is not adjusted from year-to-year. (Notice 2016-01.)
The reduction in the business rate is due to the decline in the cost of gas during 2015. Gas prices have fallen by over 22 percent since this time last year. The standard rate for business is based on an annual study of the fixed and variable costs of operating an automobile.
If you drive a car, SUV, minivan, van, or pick-up for business, you can deduct your car expenses. You can use the standard mileage rate or you can deduct your actual driving expenses.
The standard mileage rate is the easiest to use because you take a mileage deduction for a specified number of cents for every business mile you drive. To figure out your 2016 mileage deduction, multiply your business miles by the 2016 standard mileage rate of 54 cents per mile.
With this, you cannot deduct actual car operating expenses like maintenance and repairs, gasoline and its taxes, oil, insurance, and vehicle registration fees. All of these items, as well as depreciation, are factored into the 2016 mileage rate set by the IRS. Yet, you can deduct the interest you pay on a car loan, as well as parking fees and tolls for business trips (but you can’t deduct parking ticket fines or the cost of parking your car at your place of work).
The IRS adjusts the standard mileage rate each year. The annual adjustments are based on the actual costs of operating a vehicle, using a complex formula that is not disclosed to the public.
The standard mileage rate is ordinarily set for the beginning of the year and remains in effect for the entire year. But, if gas prices continue to remain low or rise dramatically, the IRS could make a mid-year correction for the last half of the year. It has done this before during years when gas prices were extremely volatile.