The IRS, on December 17, 2015, released the 2016 optional standard mileage rates that will be used to calculate the deductible costs of automobile operation for:
- business purposes
- charitable purposes
- medical purposes
- moving purposes
Starting on Jan. 1, 2016, the standard mileage rates for the use of a car, vans, pickups or panel trucks will be:
- 54 cents per mile for business miles driven. The 2015 rate was 57.5 cents.
- 19 cents per mile driven for medical or moving purposes. In 2015 this rate was 23 cents.
- 14 cents per mile driven in service of charitable organizations. This is a fixed rate.
The business mileage rate decreased 3.5 cents per mile in 2016 based on an annual study of fixed and variable costs. The medical and moving expense rates decreased 4 cents per mile in 2016 based on an annual study of fixed and variable costs. The charitable rate is based on statute and therefore only adjusted if congress takes action.
Taxpayers are not required to use the standard mileage rates, they are also entitled to a deduction based on the actual costs of using their vehicle. If the standard mileage is selected by the taxpayer, no tax depreciation is allowed under the typical tax depreciation rules (MACRS) or accelerated expensing (Section 179). The mileage method is also limited to 4 vehicles or less per IRS rules.