Mileage Rate Changes in 2016

Mileage changesThe IRS would like to welcome you to 2016 with some exciting news. Business standard mileage rates are dropping to 54¢ in 2016. Happy New Year.

The mileage rate decrease to 54¢ is down 3.5 cents from the 57.5 cents-per-mile rate, which was in effect during 2015. Effective January 1, employers can use the new mileage rate to figure out the amount to reimburse employees who are using their own cars for business purposes. It can also be used for the “cents-per-mile” valuation method, which helps you determine the amount to add to your employee’s income for personal use of certain company vehicles.

So why the change of rate? The mileage rate calculation is based on an annual study of the fixed and variable costs of operating a vehicle. So the IRS is changing with the times … and the statistics.

It’s important to be aware of this change and make adjustments on or after January 1, 2016. Otherwise, you’ll end up reimbursing an extra 3.5 cents in each employees’ income, in addition to having to deal with withholding and reporting responsibilities.

But wait, there’s more. The IRS shared the love and said the 2016 standard mileage rate for medical or moving purposes will decrease to 19 cents per mile. This a four cent drop from the 23 cents per-mile rate for 2015.

With all of this, it’s important to note that you have to be mindful of your years. If an employee files an expense report in 2016 for miles driven in 2015, the 2015 rules apply.

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