Beginning on Jan. 1, 2017, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 53.5 cents per mile for business miles driven, down from 54 cents for 2016
- 17 cents per mile driven for medical or moving purposes, down from 19 cents for 2016
- 14 cents per mile driven in service of charitable organizations
The business mileage rate decreased half a cent per mile and the medical and moving expense rates each dropped 2 cents per mile from 2016. The charitable rate is set by statute and remains unchanged. The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
A taxpayer may not 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. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.
Source: Internal Revenue Service
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If you have a business that is a separate legal entity from you, the business may not pay your personal expenses and you personally may not pay the business’s expenses. To this extent, the payments made by the business for your personally owned car should be classified a loan to you.
From there, your business is going to reimburse you for business vehicle expenses one of two methods:
- It can reimburse you at the IRS standard mileage rate; OR
- It can reimburse you for actual expenses
Regardless of the reimbursement method, you need to send proof of the business mileage and all expenses you need to be reimbursed, to your business.
Depreciation expenses for the vehicle may only be deducted by the business if the business owns the title for the vehicle used. You may not deduct depreciation for the vehicle, nor may he deduct fuel, insurance, lease payments or repairs to the vehicle on your personal income tax return, regardless of the percentage the car is used for business purposes.
So, If the business owns the car, it can fully deduct car expenses, subject to dollar limits on depreciation, against its business income. If you, as an employee or shareholder, own the car and use it for business, your expenses are deductible as a miscellaneous itemized deduction to the extent they exceed 2% of your adjusted gross income. And even this deduction may be further limited by the overall reduction in itemized deductions.
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