At the end of each year the taxman works hard to come up with a shiny new and updated Mileage Reimbursement Rate that will apply the following year. Here is a quick overview of the new rates and how they may affect your business travel.
For 2016, the IRS has updated the Mileage reimbursement rate for business travel. The standard rate for business driving is now 54 cents per mile, compared to 57.5 cents in 2015. This rate applies to the business use of cars, vans, pickups and panel trucks.
Driving for medical and moving purposes can be deducted at 19 cents per mile, down from 23 cents the previous year. The rate for charities is unchanged since 1997, at 14 cents a mile.
The IRS Standard Rates for 2016 Mileage
|Mileage Type||Rate / Mile||Effective Date||End Date|
|IRS Moving Mileage Rate||$0.19||1/01/2016||12/31/2016|
|IRS Business Mileage Rate||$0.54||1/01/2016||12/31/2016|
|IRS Medical Mileage Rate||$0.19||1/01/2016||12/31/2016|
|IRS Charitable Mileage Rate||$0.14||1/01/2016||12/31/2016|
As you can imagine, the 3.5 cents decrease is mainly due to decline in gas prices during 2015. To calculate the standard mileage rate for business, the IRS conducts an annual study of both the fixed and the variable costs of operating an automobile. It’s worth noting that sometimes, as in 2011, the rate can be updated around midyear if the cost of gas changes significantly.
To get the allowance, you need to properly record your mileage so you can prove to the IRS how many miles you drove and where you went. You can use Keepek app for that purpose or download this free Mileage Log.
Is it worth tracking mileage?
Yes, and here is an example to show you why:
- John uses his car for business. He drives, on average, 250 miles per week, or roughly 1000 miles per month.
- The car consumes 40 gallons of fuel per 1000 miles and the cost of 1 gallon is $2.5.
John can deduce $540 per month, based on the new Irs Mileage Reimbursement rate. If he drives the same number of miles each month, the total deduction for the year would be $6480 while the cost of fuel would be $1200. As you can see, tracking mileage is definitely worth the effort.
What does this mean for Keepek users?
The IRS Mileage Reimbursement rate is there to set the standard but it is not mandatory. Over the years we have noticed that many companies prefer to use their own reimbursement rate rather than follow the IRS guidance. If you are in this situation, all you need to do is log in to keepek and manually set your rate. In fact, you can even set multiple rates, for example, based on the vehicle type or location.
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