New Standard Mileage Rates and Changes to Transportation Tax Benefits

The 2016 optional standard mileage rate used to calculate the deductible costs of operating an automobile for business purposes is now in effect. Separately, a new law creates permanent parity for certain qualified transportation benefits provided to employees, retroactive to 2015.

2016 Optional Standard Mileage Rates. As of January 1, 2016, the standard mileage rate for the use of a car (also vans, pickups or panel trucks) is 54 cents per mile for business miles driven. Use of the standard rate is subject to certain requirements and limitations explained in IRS Rev. Proc. 2010-51. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. Additional information, including the basis reduction amounts for taxpayers choosing the business standard mileage rate, is available in IRS Notice 2016-1.

Permanent Parity for Qualified Transportation Fringe Benefits . Federal law allows the exclusion of employer-provided “qualified transportation fringe benefits” from an employee’s gross income, including transit passes and rides in a commuter highway vehicle between home and work. Under a new law, the monthly exclusion for combined commuter highway vehicle transportation and transit passes is made equal to the limitation for qualified parking, effective retroactively to taxable years beginning after December 31, 2014. Thus, for tax year 2015, an employer may generally exclude up to $250 per month each for transportation and qualified parking.

Additionally, for tax years after 2015, the monthly exclusion rate for combined commuter highway vehicle transportation and transit passes is adjusted to the same rate as that for qualified parking. As a result, for tax year 2016, the monthly limitations for transportation and qualified parking are each increased to $255. For more on employer-provided transportation benefits, please visit our section on Fringe Benefits within the Client Resource Center HR Library.

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