Business Standard Mileage Rate Decreases for 2017
Author: Rena Pirsos, XpertHR Legal Editor
December 14, 2016
The IRS has issued Notice 2016-79, which provides the optional standard mileage rates employers may use to calculate the deductible costs of operating an automobile for business, charitable, medical or moving expense purposes starting January 1, 2017. The Notice also provides the 2017 maximum standard automobile cost that may be used to compute the allowance under a fixed and variable rate (FAVR) plan.
Specifically, the standard mileage rates for the use of a car, van, pickup or panel truck will be:
- 53.5 cents per mile for business miles driven (down from 54 cents per mile in 2016);
- 17 cents per mile driven for medical or moving purposes (down from 19 cents in 2016); and
- 14 cents per mile driven in a passenger car in performing charitable services (set by law and unchanged).
An employer may use the standard business mileage rate to compute the amount to reimburse employees who use their own vehicles for business purposes. An employer that chooses to use the cents-per-mile valuation method may also use the rate to determine the amount to impute to an employee's income for personal use of certain company-owned or leased nonluxury vehicles.
In addition, the maximum standard automobile cost that may be used to compute the allowance under a fixed and variable rate (FAVR) plan is $27,900 for 2017 (down from $27,800 in 2016). An FAVR allowance uses a flat rate or stated schedule that combines periodic fixed and variable rate payments. If used by an employer, its employees do not have to keep a record of their actual expenses.
Employers should ensure that they update their payroll systems to reflect the new rates for affected travel occurring on or after January 1.