Rather than keeping track of the actual cost of operating a vehicle, employees and self-employed taxpayers can use a standard mileage rate to compute their deduction related to using a vehicle for business. You might also be able to deduct miles driven for other purposes, including medical, moving and charitable purposes.
What are the deduction rates?
The rates vary depending on the purpose and the year:
- Business: 54 cents (2016), 53.5 cents (2017)
- Medical: 19 cents (2016), 17 cents (2017)
- Moving: 19 cents (2016), 17 cents (2017)
- Charitable: 14 cents (2016 and 2017)
The business standard mileage rate is considerably higher than the medical, moving and charitable rates because the business rate contains a depreciation component. No depreciation is allowed for the medical, moving or charitable use of a vehicle.
In addition to deductions based on the standard mileage rate, you may deduct related parking fees and tolls.
What other limits apply?
The rules surrounding the various mileage deductions are complex. Some deductions are subject to floors; some require you to meet specific tests in order to qualify.
For example, miles driven for health-care-related purposes are deductible as part of the medical expense deduction. But medical expenses generally are deductible only to the extent they exceed 10 percent of your adjusted gross income. (For 2016, the deduction threshold is 7.5 percent for qualifying seniors.)
While miles driven related to moving can be deductible, the move must be work-related. In addition, among other requirements, the distance from your old residence to the new job must be at least 50 miles more than the distance from your old residence to your old job.
Substantiation requirements
There are also substantiation requirements, which include tracking miles driven. In some cases, you might be better off deducting actual expenses rather than using the mileage rates. If you drove potentially eligible miles in 2016 but can’t deduct them because you didn’t track them, start tracking your miles now so you can possibly take advantage of the deduction when you file your 2017 return next year.
If you have questions, contact us to help ensure you deduct all the mileage you’re entitled to deduct — but not more. You don’t want to claim deductions you can’t support and risk paying back taxes and penalties later.