The Internal Revenue Service (IRS) has been busy this year with releases coming out practically every week. It’s hard for employers to keep up on the latest IRS deliberations, so this article consolidates a few of the most recent published directives.
Distributed December 18, 2015, this Notice provides the optional 2016 standard mileage rates for computing the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes. It also provides the amount used in calculating reductions to basis for depreciation taken under the business standard mileage rate.
Revenue Procedure 2010-51 provided rules for computing the deductible costs of operating a car for determining business, charitable, medical, or moving rates and Notice 2016-1 describes an alternative method for substantiation of actual allowable expense amounts for those that maintain adequate records.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. Although employees generally deduct an amount equal to the business standard mileage rate times the number of business miles traveled, some prefer to use actual fixed and variable costs. Variable costs include gasoline and oil used by the automobile that are allocable to traveling those business miles (subject to some limitations). Standard mileage rates for 2016 business travel is 54 cents per mile, charitable travel is 14 cents, and medical and moving travel is 19 cents.
Costs for items such as depreciation or lease payments, insurance, and license and registration fees are not deductible for these purposes and are not included in the charitable or medical and moving standard mileage rates.
Revenue Procedure 2016-14
This Procedure provides some 2016 inflation adjustments and also provides additional items adjusted for inflation due to the enactment of the “Protecting Americans from Tax Hikes Act" (PATH Act) of 2015. Although these rates were distributed earlier, this Revenue Procedure officially amends the original Rev. Proc. 2015-53 (October 21, 2015).
Expenses paid or incurred by eligible educators in connection with the purchase of books, supplies, computer equipment and other equipment, and supplementary materials used in the classroom (some special rules apply to this list) may be tax deductible. For taxable years beginning after December 31, 2015 the deduction cannot exceed $250.
Qualified transportation fringe benefits, excludable from income, for taxable years beginning in 2016 for commuter highway vehicles and transit passes, combined, is $255. Section 105 of the PATH Act creates parity between transit benefit exclusions and the exclusion for qualified parking.
Section 124 of the PATH Act provides the dollar limitation for the aggregate cost of Internal Revenue Code Section 179 property that a taxpayer may elect to expense at $500,000, with limitations. For taxable years beginning in 2016 these amounts are adjusted for inflation.
Fact Sheet 2016-8
Distributed February 2016, an IRS Fact Sheet (FS) is just that – a condensed listing of previous legislation of interest to individuals and employers.
Click here for a downloadable copy of this report.