Don't Mess With Taxes

Your business-related driving probably won't save you as much on your taxes in 2017.

The reason? The Internal Revenue Service announced today that the optional standard mileage rate for business use of your vehicle is a half-cent less than in 2016.

A trip to the vet likely won't count as a tax deductible medical expense, but other allowable miles in 2017 can be claimed at 17 cents apiece.

It drops on Jan. 1, 2017, to 53.5 cents per mile. For the final few days of 2016, the business mileage rate is 54 cents per mile.

Along with a smaller per-mile business amount, the IRS also dropped the rates for medical-related road trips and moving. They go from 19 cents this year to 17 cents in 2017.

The charitable mileage rate remains at 14 cents per mile because this rate is set by Congress and not affected by inflation.

The table below illustrates which rates apply to which year's travel.

Continued drop: This is the second straight year that the adjustable mileage rates have fallen.

While it's always a bummer to lose some of the value of a tax write-off, the lower rates at least mean that the automotive costs used to determine the rates are lower, too.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating a vehicle. The rate for medical and moving purposes is based just on the variable costs.

The biggest fixed automotive cost is the vehicle price. The biggest variable cost is gasoline.

Rates are optional: The IRS also points out that the standard mileage rates for calculating your deductible driving are optional.

In most cases, you have the choice of using the rates set by the IRS or deducting your actual automotive costs when it's used to conduct business.

While computing the actual cost of using your auto to do business could provide you with a bigger write-off, it does mean more work.

And, notes the IRS, you cannot use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.

Plus, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

If, however, you do get the choice of deciding which mileage deduction option to use, do at least a down and dirty comparison to make sure you use the one that provides the best tax break.

Back on the inflation track: Remember when I started a tax-related inflation adjustment series? Yeah, I don't blame you for forgetting. That was back in late October and the last entry was in early November.

Well, the IRS standard mileage rates announcement today jump-started that stalled series of blog posts.

While the annual mileage rate tweaks technically aren't part of the overall IRS inflation adjustments, they merge nicely into that tax roadway. So I've included it, and today's item, as part of the series.

Careful readers will note that the mileage rates are officially listed as the 10th, and last, of the inflation updates, meaning today's post jumps ahead of the two remaining inflation segments on expatriate/foreign income issues and tax penalties. I promise to get to those 8th and 9th entries by this weekend.

Welcome to Part 10 of the ol' blog's series on 2017 inflation adjustments.
You can find links to all 2017 inflation posts in the series' first item: 
Income Tax Brackets and Rates.
Today we look at changes to the standard optional mileage rates.
Note: The 2017 figures apply to 2017 returns that are due in 2018.
For comparison purposes, you'll also find 2016 amounts to be used
in filing 2016 returns due next April.

Thanks for your patience.

You also might find these items of interest:

• 4 East Coast states to test mileage tax
• Driving down your tax bill with auto-related deductions
• U.S. Tax Court denies business deduction for Aston Martin