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Update for 2017: Info about Mileage Deductions

Mileage rates for business use of a vehicle will drop again for the second year in a row. The rate of 53.5 cents/mile compares to 2016’s 54 cents/mile, due to consistently low gas prices. The portion of the mileage rate for depreciation is 25 cents/mile, compared to 2016’s 24 cents/mile. Mileage for medical or moving purposes will be 17 cents/mile in 2017 (.02 lower than 2016). The charitable/volunteer mileage rate remains the same – 14 cents/mile.

You’ll use the 2016 rate for filing 2016 taxes, but this is a good time of year to remind taxpayers of the importance of accurate recordkeeping. Mileage deductions must have adequate records that includes the following:

  • Date
  • Starting and ending location
  • Number of miles (starting and ending mileage)
  • Business purpose (Commuting miles to and from a permanent work location don’t qualify.)

The mileage log must include the starting odometer for the year and the ending mileage on December 31. You must keep the records for three years following the year that you claim the mileage deduction. Records for tolls and parking are separate expenses.

Apps for tracking mileage

Compliance with mileage tracking is easy with a smart phone app that tracks and records mileage. You can access the records for personal use or for reimbursement documentation. The apps let you classify mileage based on business, personal, charity, medical or moving to match the IRS categories.

Alternate deductions

If tracking mileage is not feasible, or if a person doesn’t want to take the time to keep records, then the business use percentage of actual expenses is deductible. Deductions include all operating expenses, such as gasoline, repairs, maintenance, and fees. Taxpayers must keep all records of actual expenses to qualify.

Another option for employers is to adopt a fixed and variable rate plan (FAVR). Under such a plan, a standard amount is deemed substantiated for reimbursement to employees who drive their personal vehicle for company business.

Talk with your Salmon Sims Thomas tax advisor if you have questions about deductions, FAVR plans, and/or record keeping requirements.