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The Internal Revenue Service (“IRS”) has announced the optional 2016 standard mileage rates (Notice 2016-01) used to calculate the deductible costs of operating an automobile for business, medical or moving, and charitable purposes. With the lowest average gas prices since 2009, the standard mileage rates are set to decline in 2016.
The IRS Standard mileage rates for the use of an automobile effective on or after January 1, 2016 will be:
The business mileage rate is calculated using an annual study of the fixed and variable costs of operating a vehicle (i.e., depreciation, insurance, repairs, maintenance, gas and oil). The medical or moving rate is calculated using the variable costs (i.e., gas and oil). The business mileage and medical or moving rates declined by 3.5 cents and 4 cents per mile, respectively.
The charitable rate is set by Congress and never adjusted for inflation. This amount has remained unchanged.
As always, the option of claiming deductions based on the actual costs of using a vehicle rather than the rates listed above is available to taxpayers.
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