Organizations of all sizes use the IRS mileage rates to determine appropriate deductibles for their vehicle operation costs. These rates apply to businesses, charities, health care organizations, movers, etc. and should be used for cars, pickup trucks, vans, and panel trucks.
As of January 1, 2017, the IRS optional standard business mileage rate will equal 53.5 cents per mile (a half-cent cents less than 2016).
The IRS has set the medical/moving rate to 17 cents per mile (2 cents less than 2016) and the charitable organization rate to 14 cents per mile (statutory, and thus unchanged by the IRS).
Businesses that operate fleets of vehicles can claim higher mileage rates because they use these vehicles primarily for business purposes. The IRS calculates the business mileage rate to cover both the fixed (insurance, depreciation, repairs, maintenance, tires, etc.) and variable costs (gas, oil, etc.) of operating a vehicle.
If you use your personal vehicle for medical/moving purposes, the IRS allows you to claim a deduction for only the variable transportation costs. They assume you didn’t buy your vehicle just for traveling to the doctor’s office or moving cross-country.
Likewise, the lawmakers who created the charitable use statute didn’t want to tax you for using your vehicle to help the community. However, they didn’t extend this deductible to include the fixed expenses associated with your daily commute.
If you use your vehicle for both business and personal use, make sure to carefully track your mileage. At tax time, simply subtract your personal mileage from your total yearly mileage and multiply this result by the appropriate rate.
For example, say you used your pickup truck to transport hand-polished, organic, free-range ostrich eggs from your ranch to local health food stores and the farmers’ market.
However, you also drove your truck into town to visit your family, get groceries, and go to the movies. At the end of the year, your odometer reads 10,000 more miles than it did the previous year. According to your records, you drove 4,000 of these miles for personal reasons.
If you apply the optional standard business mileage rate, your vehicle use deductible would equal $3,210:
Vehicle Use Deductible = (Yearly Mileage [10,000] - Personal Mileage [4,000]) x Business Mileage Rate [.535]
As you can see, you can deduct quite a sizable sum from your taxable income with proper record-keeping!
If you operate a vehicle for many purposes, simply calculate each rate separately. Say, for example, that your ostrich ranch owns a large van as well as the pickup truck in the last example.
(You typically drive the pickup truck because it gets better gas mileage and has a better sound system, but the van comes in handy sometimes.)
In the appropriate tax year (these rates apply to the 2017 tax year, filed in 2018), you use your van for certain business purposes, such as transporting eggs to market in inclement weather. Your total business mileage equals 1,000.
Additionally, you use this van to move into a larger, nicer house with a beautiful view of the ostrich pastures. Traveling across town many times, you rack up another 100 miles. You put 250 miles on this vehicle when transporting animals, feed, and equipment for the local animal shelter. You also use it to visit your family in another state, carefully tracking your personal mileage.
At the end of the year, you subtract your personal use miles from your mileage figures (see above). Because you use your van for many purposes, you organize your remaining mileage into three categories. Next, you multiply each mileage figure by its appropriate rate:
Business Mileage [1,000] x Business Rate [.535] = Business Deductible 
Moving Mileage  x Medical/Moving Rate [.17] = Medical/Moving Deductible 
Charity Mileage  x Charity Rate [.14] = Charity Deductible 
Finally, you total up your various deductions, which come to $587.
(Remember – you can also deduct related expenses, such as tolls and parking fees.)
The IRS offers these rates as a time-saver. If you like, you can manually track your expenses, which may call for a higher deduction. However, many businesses find using these estimates balances out with the cost (and hassle) of calculating their actual fleet expenses.
Regardless of the method you choose, you and your colleagues can use Toggl Track to easily track your drive times business and personal mileage.
If you use any Modified Accelerated Cost Recovery System (MACRS) depreciation method (or claim a Section 179 deduction) for a vehicle, you may not use the optional standard business mileage rate to estimate your deductible.
Organizations operating more than four vehicles at the same time may not estimate their expenses with the optional standard business mileage rate.
If you believe you may qualify for special treatment by the IRS, read the fine print in the IRS’s Rev. Proc. 2010-51. Notice 2016-79.
In this document, the IRS describes the various standard mileage rates and their appropriate use with many caveats and addendums.
For example, you can calculate reductions to your base depreciation figures for use with the optional standard business mileage rate. You can also determine the maximum vehicle costs your organization may use with fixed and variable rate plans.
More than anything, your choice to use the IRS’s standard mileage rates or track your expenses line-by-line depends on location.
The IRS creates this multiplier by studying transportation expenses across the nation. If you live in an area with increased transportation expenses, consider manual tracking.
For example, you may operate your vehicles in a dense urban area with heavy traffic and high fuel costs. Conversely, you may run a business in a remote, mountainous area and invest more than usual in maintenance and repairs.
Remember, Toggl Track has your back, no matter where you work – and which type of mileage tracking strategy you use!
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