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The Internal Revenue Service (IRS) has released the 2017 optional standard mileage rates that employees, self-employed individuals, and other taxpayers can use to compute deductible costs of operating automobiles (including vans, pickups and panel trucks) for business, medical, moving and charitable purposes. The updated rates are effective for deductible transportation expenses paid or incurred on or after Jan. 1, 2017, and for mileage allowances or reimbursements paid to, or transportation expenses paid or incurred by, an employee or a charitable volunteer.
With gas prices dropping and vehicle prices holding steady in 2016, the optional mileage rates for business expenses for 2017 dropped to their lowest levels over five years. The standard mileage rates for the use of a car, van, pickup of panel truck used in a business is:
As an alternative to the optional mileage rates, taxpayers can use the actual expense method. Actual expenses include expenditures for gas, oil, repairs, tires, insurance, registration fees, licenses and other qualified costs, including depreciation. Other items, however, such as parking fees and tolls may also be deductible. A taxpayer may not use the business standard mileage rate after using a depreciation method under Code Sec. 168 or after claiming the Code Sec. 179 first-year expensing deduction for that vehicle. A taxpayer also may not use the business rate for more than four vehicles at a time.
For automobiles used for business, a taxpayer must use 23 cents per mile as the portion of the standard mileage rate treated as depreciation for 2017 for purposes of later determining any gain or loss on a subsequent sale.
To compute the allowance under a fixed and variable rate (FAVR) plan for 2017, the standard automobile cost may not exceed $27,900 for cars or $31,300 for trucks and vans.
If you have any questions regarding your mileage or car expense options, contact our tax advisors today.
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