Rates Decreased for Business, Medical, and Moving Deductions

Declining energy prices have apparently made their mark on the rates used to figure deductible costs of operating a vehicle for business, medical or moving purposes. The Internal Revenue Service has shaved 2017 standard mileage rates, beginning January 1.

The business mileage rate for operating cars, vans, pickups or panel trucks decreased a half-cent per mile to 53.6 cents per mile. The rate for medical and moving expense both dropped 2 cents per mile to 17 cents per mile. The rate for miles driven for a charitable cause remains unchanged, since it’s fixed by statute.

The standard mileage rate for business miles driven is based on an annual study of fixed and variable costs of operating a vehicle. The rate for medical or moving purposes is based on the variable costs.

Taxpayers have the option of claiming the standard mileage rates or using the actual costs of operating their vehicle for the qualified deductible uses.

Using the standard rates, however, also comes with some cautions. A taxpayer can’t use the standard business mileage rate, for example, after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. Also, the business standard mileage rate can’t be used for more than four vehicles simultaneously.

For more on the new mileage rates and other vehicle deduction standards, check out Revenue Procedure 2010-51, and Notice 2016-79.