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The Internal Revenue Service (IRS) has issued the 2016 optional standard mileage rates for calculating the deductible costs of operating an automobile for business, charitable, medical and moving purposes. The decline in gas prices appeared to spur the drop in the optional rates.
Check our the new standard mileage rates for 2016 below.
There are rules for computing deductible costs of operating an automobile, including the use of the optional standard rates. The business standard mileage rate is a substitute for all the costs of an automobile for business use, including depreciation, maintenance and repairs, and gasoline.
However, a taxpayer may not use the business standard mileage rate after using a depreciation method or after claiming the Section 179 deduction for that vehicle. Furthermore, a taxpayer may not use the business rate for more than four vehicles at a time.
To compute the allowance under a fixed and variable rate plan, the standard automobile cost may not exceed $28,000 for cars or $31,000 for trucks and vans.
For automobiles used for business, a taxpayer must use 24 cents per mile as the portion of the standard mileage rate treated as depreciation for 2016. For prior years, these amounts were 24 cents for 2015, 22 cents for 2014, and 23 cents for both 2012 and 2013. These amounts are used to calculate basis reductions for depreciation taken under the standard mileage rate.
If you have questions on the new standard mileage rates and how to properly account for any automotive depreciation, contact our tax advisors today.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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