Earlier in the year, the U.S. government permanently extended a few tax credits to reduce the tax burden on low to mid-income group taxpayers and small business owners. Due mostly to falling fuel costs, in an announcement of the standard business mileage rate for 2016, the IRS announced that the allowed deduction will be calculated based on 54 cents per mile. This is is 3.5 cents lower than the 2015 business mileage deduction rate of 57.5 cents per mile. These rates have also been reduced for any trips taken for medical purposes or moving.
The following is a brief overview of the mileage deduction rates for 2016:
2016 Mileage Deduction Rates
- The Mileage deduction rate for qualifying business driving is 54 cents per mile.
- The Mileage deduction rate for qualifying medical and moving purposes was set at 19 cents per mile.
- The deduction rate for IRS qualifying charity service will stay constant at 14 cents per mile.
Generally, tax-related deduction rates can be increased due to inflation. In the case of deductible mileage rates, the fixed and variable costs of operating a vehicle play an important factor in determining these rates. With variable costs being the only factor in the case of medical and moving rates. Since both the cost of purchasing a vehicle and fuel have decreased recently, the final rate for business mileage deduction is lower than previous year’s rate.
The rate for IRS qualifying charities remain the same since it is decided by the Congress instead of any fixed or variable cost associated with a vehicle.
Additionally, if the current studies continue to be accurate, considering the falling rate of gasoline. It is likely that the mileage deduction rate could even go lower in 2017. As the medical and relocation trips was reduced by 17.4% the business mileage deduction rate only fell by 6%.
These rates can apply for trips occurring after January, 2016. Any trips before and on December 2015 would qualify for 2015 deduction rates. These rates do not impact those taxpayers who claim deduction based on actual bills instead of a standard mileage rate amount.
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. We are a team of highly experienced tax professionals with extensive knowledge of U.S. and Canadian cross-border compliance as well as U.S. and Canadian tax laws.
Furthermore, as a full service accounting firm. AG Tax is dedicated to assist you with even your most complex tax needs.
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- Canadian Personal and Corporate tax returns
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