If you drive for business purposes, you can only claim 54 cents per mile as a deduction on your tax return in 2016.
Small business owners and 1099 independent contractors who must spend some time behind the wheel to take care of business are getting the short end of the stick from the IRS in 2016. That’s because the federal tax collection agency recently announced that it is decreasing the standard mileage rate for business trips by a surprisingly significant amount, perhaps in part due to the record-low gas prices drivers have enjoyed.
2016 Standard Mileage Rate
The deductible rate in 2015 is 57.5 cents per mile driven for business purposes. In 2016, the new rate will only be 54 cents per mile driven, a decrease of 3.5 cents per mile. This is perhaps the largest decrease in several years as the rate had actually increased from 2014 to 2015.
Medical, Moving, & Charitable Mileage Rates
In addition to mileage rates for writing off business-specific trips by car, there are standard mileage rates for deducting trips for medical, moving, and charitable purposes as well. These rates only apply to self-employed individuals who are eligible to write off such expenses on their income tax returns.
For tax year 2016, the rate for medical and moving trips is 19 cents per mile driven, which is down 4 cents from tax year 2015. The new rate for charitable driving purposes – such as delivering a large item to donate – is 14 cents per mile, which remains the same from tax year 2015. Keep in mind that all of the IRS mileage rates for 2016 apply to applicable miles driven starting on Friday, Jan. 1, 2016.
Deducting Vehicle Mileage vs. Actual Expenses
Self-employed individuals who use their personal vehicles to take business-related trips have two options when it comes to deducting their time on the road – claiming mileage driven or deducting actual expenses.
The above standard mileage rates for business, moving, medical, and charitable driving purposes apply to the mileage deduction option.
If you choose to deduct actual expenses instead, this write-off can include gas, tolls, and vehicle maintenance. You should keep solid records and receipts when claiming the actual expenses deduction, although recordkeeping is important for either deduction option in case the IRS questions your write-off.
To ensure you claim all applicable tax deductions from the IRS to reduce your business or personal tax bill, turn to the accounting professionals at 1-800Accountant. Call 1-800-222-6868 or check out www.1-800Accountant.
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