Prepared by Worldwide ERC® Tax Counsel, Peter K. Scott
Peter Scott Associates
Current as of January, 2017
Each year, the IRS publishes optional standard mileage rates, establishing the amounts deductible for use of an automobile in business and for other purposes, such as moving.
If an employee uses his or her automobile in a move that qualifies under IRS Code §217, he or she may either deduct the actual out-of-pocket expenses, such as gas, oil, repairs, parking, and toll fees but not depreciation, maintenance, or insurance, or take the current standard deduction (23 cents per mile as of January 1, 2015), plus parking and toll fees. Business travel expense deductions also may be computed based on actual expenditures (including depreciation, etc.) or on a standard rate (54 cents per mile as of January 1, 2016). Each year the IRS re-computes and publishes new allowable standard rates, so for years before or after 2016 the rates may not be the same. For example, for 2015 the rates are 23 cents per mile for moving (versus 19 cents per mile for 2016), and 57.5 cents per mile for business travel. Reimbursements by an employer at the standard rates are excluded from income of the employee.
The rates are based on an annual study of fixed and variable costs of operating an automobile conducted for the IRS by an independent contractor. The rates for business and moving differ because the rate for business use includes fixed costs such as depreciation, which are not allowed as medical or moving deductions. Both rates include variable expenses such as fuel. Taxpayers are also allowed to deduct items such as parking and tolls in addition to the standard mileage rate.
As noted, use of the standard deduction rates is optional; taxpayers are always free to determine their own actual costs of operating a vehicle. However, such costs must be substantiated through detailed records, while the use of the standard rates avoids any need to substantiate the underlying costs incurred, although taxpayers must still maintain records of the miles driven and the purpose of each trip.
Generally, the rates announced in December of each year remain in effect for all of the following year. However, in 2005, 2008, and 2011 the IRS provided unusual mid-year increases to reflect dramatic escalation of fuel costs.
The standard moving and business mileage rates for the last few years are as follows:
2004: 14 cents and 37.5 cents
2005: 15 cents and 40.5 cents until September 1, then 22 cents and 48.5 cents
2006: 18 cents and 44.5 cents
2007: 20 cents and 48.5 cents
2008: 19 cents and 50.5 cents until July 1, then 27 cents and 58.5 cents
2009: 24 cents and 55 cents
2010: 16.5 cents and 50 cents
2011: 19 cents and 51 cents until July 1, then 23.5 cents and 55.5 cents
2012: 23 cents and 55.5 cents
2013: 24 cents and 56.5 cents
2014: 23.5 cents and 56 cents
2015: 23 cents and 57.5 cents
2016: 19 cents and 54 cents
2017: 17 cents and 53.5 cents
An employee cannot deduct moving expenses using the business travel rate (Adamson v. Commissioner, 32 T.C.M. 484 (1973)). If the employer reimburses the employee at the business rate, the difference between the reimbursement and the amount the employee is permitted to deduct at the moving expense rate would constitute wage income to the employee, subject to withholding, employment tax, and reporting on the Form W-2. Similarly, if the employer reimburses business travel at a mileage rate higher than the standard rate, the excess is treated as wages.