The IRS recently announced the official standard mileage rates for 2016. The mileage rates are:
• 54 cents per mile for business use. This is a 3.5 cents per mile decrease from the 2015 business mileage rate.
• 19 cents per mile for medical and moving miles driven in 2016. This is a 4 cents per mile decrease from the 2015 rate.
• 14 cents per mile for charitable related miles driven in 2016. This remained unchanged from 2015. (The charitable rate is set by law and does not automatically adjust annually.)
The drop in fuel costs during 2015, which reached a six-year low, is the obvious reason for the declining rates.
The mileage rate can be used by businesses to reimburse employees for mileage costs incurred while driving business vehicles in an employee capacity. They must submit mileage logs and the new mileage rate must be used by the business to deduct the reimbursements and the employees to receive the reimbursement tax free.
As always—be sure to review this with your tax advisor before setting up an employee mileage reimbursement plan.