Standard mileage rate for 2016 is less than 2015

Ten Forty + Quality Tax Preparation & Financial Services 281-397-7777 Fax 281-397-7443 Tax Tips Standard Mileage rate for 2016 has decreased. The IRS recently announced the mileage rate for business driving in 2016 will be 54¢ a mile, a decrease from the 2015 rate of 57.5¢ per mile. You can use this rate for cars, vans, pickups, and panel trucks instead of tracking the actual costs of operating those vehicles for business purposes. An annual study of the fixed and variable costs of operating an automobile is used to determine what the standard mileage rate will be for a given year. In addition to the mileage rate, a separate deduction may be claimed for parking fees, tolls, interest relating to the purchase of the automobile, and state and local personal property taxes. The standard business mileage rate isn't applicable to automobiles used for hire, such as taxicabs, or for fleets of automobiles you use simultaneously. One other caution: You can't use the standard rate if the vehicle was previously depreciated by other than the straight-line method, including bonus depreciation or the Section 179 deduction. A depreciation component of 24¢ a mile is included in the 2016 business mileage rate (the same as 2015). This depreciation reduces your cost basis in the vehicle. You have a choice when using your vehicle for business. You can use actual expenses which include gas, repairs, maintenance, tolls, washing, parking, and depreciation. It is important to note that under the actual expense method you have to track your business and your personal mileage. The business expense deduction is based on a percentage of your business miles to total miles. Or you can use the standard mileage rate (business miles times $.54 per mile). Using the standard mileage rate you only track your business miles. In most cases the standard mileage rate provides a larger deduction. When you use the standard rate you can use commuting miles (to and from your business office or client (unless you work out of your home and have a home office)). You cannot deduct gas, oil, repairs, or car insurance. You can deduct parking, tolls, and car washes. Whether you are using actual expenses or using the standard mileage rate you must keep a log of your business mile usage. If you have a smart phone you can download an app that well help you track your mileage. Please call us if you have any questions. 1040 + Quality Tax Preparation & Financial Services Joseph C Becker www.tenfortyplus.com 281-397-7777, Fax 281-397-7443 joeb@tenfortyplus.com Contact Us There are many events that occur during the year that can affect your tax situation. Preparation of your tax return involves summarizing transactions and events that occurred during the prior year. In most situations, treatment is firmly established at the time the transaction occurs. However, negative tax effects can be avoided by proper planning. Please contact us in advance if you have questions about the tax effects of a transaction or event, including the following: • Pension or IRA distributions. • Retirement. • Significant change in income or • Notice from IRS or other deductions. Revenue department. • Job change. • Divorce or separation. • Marriage. • Self-employment. • Attainment of age 59½ or 70½. • Charitable contributions • Sale or purchase of a business property in excess of $5,000. • Sale or purchase of a residence or other real estate.