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New Mileage Rates for 2017

The 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 January 1, 2017, and for mileage
allowances or reimbursements paid to, or transportation expenses paid or incurred by, an
employee or a charitable volunteer on or after January 1, 2017.


Business mileage rate


Beginning on January 1, 2017, the standard mileage rates for the use of a car, van, pickup
of panel truck used in a business is:

  • 53 .5 cents per mile for business miles driven (down from 54 cents in 2016);
  • 17 cents per mile for medical and moving expenses (down from 19 cents in 2016);
  • 14 cents per mile for miles driven for charitable purposes (permanently set bystatute at 14 cents).

Comment. The business rate had increased by 1.5 cents in 2015 and then dropped
4 cents in 2016, while the medical and moving rates dropped slightly (by 0.5
cents) in 2015 and then more significantly by four cents in 2016. With gas prices
dropping and vehicle prices holding steady in 2016, when statistics for the 2017
rates are gathered, the optional mileage rates for business expenses for 2017
dropped to their lowest levels over five years.


Comment. 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.


Other amounts


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 oflater
determining any gain or loss on a subsequent sale. For prior years, these amounts are 24
cents for 2016 and 2015; 22 cents for 2014; and 23 cents for both 2012 and 2013.
To compute the allowance under a fixed and variable rate (FA VR) plan for 2017, the
standard automobile cost may not exceed $27 ,900 for cars or $31,300 for trucks and vans
(down from $28,000 for cars for 2016 but up slightly for trucks and vans from $31,000
for 2016).