On December 14, 2016, The Internal Revenue Service announced the 2017 Standard Mileage Rates for business, medical and moving purposes. The new rates used to calculate the deductible costs of operating an automobile will go into effect on January 1, 2017. The standard mileage rates 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
Although the charitable rate is set by statute and remains the same, the same can’t be said for the business, medical and moving expense rates. The business mileage rate went down half a cent per mile, and both medical and moving purposes dropped 2 cents per mile from 2016. The standard mileage rate for business is based on an annual study of the fixed variable costs of operation of an automobile, while moving and medical is based on variable costs.
Rev. Proc. 2010-51. Notice 2016-79 contains the standard mileage rates, the amount a taxpayer must use when calculating reductions to basis for depreciation taken under the business standard mileage and the maximum standard automobile cost that a taxpayer may use in the computing the allowance under a fixed and variable rate plan. Taxpayers have the option of calculating costs of their car rather than using the standard mileage rates. Due to the depreciation method under the Modified Accelerated Cost Recovery System, (MACRS) many taxpayers may not use the business standard mileage for a vehicle.
Taxpayers are not required to use these substantiation methods. A taxpayer may substantiate actual allowable expense amounts if adequate records and other sufficient evidence are kept. The Internal Revenue Service prospectively adjusts the standard mileage rates for business, medical and moving expenses annually.