The IRS mileage rate for 2017 has recently been announced. Some minor increases have already been noted. Read on to find out what the new rules are.
In summary, the IRS mileage rate for 2017 is:
– 53.5 cents/mile for business miles, which is a 0.5 cent decrease
– 17 cents/mile for moving or medical purposes, a 2 cent decrease
– 14 cents/mile for charitable organizations, which has stayed the same
These figures apply to any miles driven after January 1, 2017.
The IRS is responsible for setting yearly business, medical, moving, and charitable miles. They determine the rates by looking at the variable and fixed costs associated with driving a vehicle. It factors in average costs, repairs, maintenance, and gas usage. It is believed that the decreases in the IRS mileage rate for 2017 is mainly due to the decline in oil prices during the past year.
Claiming Standard Rates or Actual Expenses:
If you use your own car for business purposes, you can use the SMR (Standard Mileage Rate), or you can track your actual miles. The SMR is the easier option, although you do have to keep a list of where you drove to, when, and how many miles it was. If you choose to track, then your deduction is likely to be larger, but you also have to keep very clear records in terms of the price of oil, gas, maintenance, repairs, fees, depreciation, insurance, and so on.
Choosing between the two is best done by looking at your car. If you drive a small car, which is cheap to operate, the SMR will usually cover you for at least what you would calculate manually. For larger cars, this may be different. Hence, make sure that the during first year of using your car, you actually track your expenses, so that you can see if you would be better off using the SMR.
Employee Mileage Reimbursement:
Whether or not employees should be reimbursed for their business mileage is an important question. While most businesses do, there are certainly exceptions. Reimbursements can be deducted from taxes, so long as an accountable plan is used. And even if no accountable plan is used, the cost can be deducted, although it should be listed as a wage, rather than a reimbursement for travel.
The reimbursement policy for employees should be clearly listed in any business' employee handbook. If there is no official policy, then employees should first speak to their manager and, if necessary, also to the human resources department, who should hold the relevant information.
Employers are encouraged to check their current policies and to update their information according to the new rules, while at the same time informing their employees of the changes. Additionally, you have to keep checking the IRS for new announcements. While the mileage rates are generally valid for an entire year, there have been cases in which they have made changes half year through, much to the annoyance of many businesses. Unfortunately, there is nothing that can be done about that.