Every year, the U.S. Internal Revenue Service (IRS) announces the standard mileage rates to be used by taxpayers for deducting automobile expenses for vehicles used for business, charitable, medical or moving purposes.

These standard mileage rates are determined by the IRS, based on an annual study conducted, by an independent contractor, on the fixed and variable costs of operating an automobile used for business, medicals and other non-personal purposes. The standard mileage rate is, however, based only on the variable costs.

The following is an overview of the standard mileage rates for 2017 to be used by taxpayers when claiming a tax deduction for expenses incurred when vehicles are used for non-personal reasons, i.e. for business, charitable, medical or moving purposes.

2017 U.S. Standard Mileage Rates

Starting January 1, 2017 U.S. taxpayers may calculate the tax deduction for vehicles used for business, charity and medical purposes using the following mileage rates:

  • 53.5 cents per mile driven for business purpose,
  • 17 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

 

Difference in The Mileage Rates from 2016

The 2017 standard mileage rates for automobiles used for business, medical, and moving purpose has been reduced from 2016 whereas the mileage rate for charitable purpose remains the same.

The business mileage rate has decreased half a cent per mile (54 cents per mile in 2016) while the medical and moving expense rates each have dropped 2 cents per mile for 2017 (19 cents per mile in 2016).

 

Using The Actual Automobile Expense Amounts Instead of the Standard Mileage Rate

In order to calculate the tax deduction amount based on the actual costs incurred in operating an automobile for business, moving, medical or charity purpose, the taxpayer needs to substantiate the expenses used to calculate the deduction amount.

There are certain tax rules pertaining to the ordinary and necessary nature of the business expenses, and substantiating the amount and the purpose of the use while computing the deductible costs of operating an automobile used for non-personal purposes.

A taxpayer is only required to substantiate the purpose and amount of miles traveled when using the standard mileage rates for calculating the tax deduction amount for a vehicle.

 

Additional U.S. Standard Mileage Related Information

  • Any vehicle, whether it is a car, van, pickup or panel truck qualifies for deduction using the standard mileage rate as long as the vehicle is used for business, charity, or medical purposes.
  • A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.
  • If a vehicle is used for both personal and non-personal reasons, proper records should be maintained regarding the miles driven for work purpose and miles driven or personal reasons.

In summary, taxpayers have the option of using the actual costs of using their vehicle rather than the standard rates, if taxpayers feel that claiming the actual costs is more beneficial. It is suggested, however, to seek the help of a U.S. tax professional to avoid any tax situation which could lead to significant penalties and interest.

 

AG TAX LLP CAN HELP

If you have any tax-related queries, need assistance with tax planning or filing your tax returns please contact us. Our team comprises of highly experienced tax professionals with extensive knowledge of US and Canadian tax laws as well as cross-border compliance.

Furthermore, as a full service accounting firm, AG Tax assures complete assistance with even your most complex tax needs.

We can assist with:

  • Canadian Personal and corporate tax returns
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