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IRS 2017 Standard Mileage Rates for Business, Medical and Moving

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The IRS recently issued the optional IRS 2017 standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

According to the IRS Rev. Proc. 2010-51, a taxpayer may use the business standard mileage rate to substantiate a deduction equal to either the business standard mileage rate times the number of business miles traveled. If he does use the IRS 2017 standard mileage rates, then he cannot deduct the actual costs items. Even if the IRS 2017 standard mileage rates are used, however, the taxpayer can still deduct as separate items the parking fees and tolls attributable to the use of a vehicle for business purposes.

It is important to note that a taxpayer does not have to use the IRS 2017 standard mileage rates. He always has the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. In such a case, all of the actual expenses associated with the business use of the vehicle can be used: lease payments, maintenance and repairs, tires, gasoline (including all taxes), oil, insurance, et cetera.

The IRS 2017 standard mileage rates shall be as follows:

  • 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 IRS 2017 standard mileage rates are generally lower than last year’s mostly due to the lower price for gasoline. 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.

On the other hand, in some circumstances, a taxpayer cannot use the IRS 2017 standard mileage rates. For example, a taxpayer cannot use the IRS business standard mileage rate for a vehicle after using any MACRS depreciation method or after claiming a Section 179 deduction for that vehicle. Additionally, the business standard mileage rate cannot be used for more than four vehicles used during the same period of time. More information about the limitations on the usage of the IRS 2017 standard mileage rates can be found in the IRS Rev. Proc. 2010-51.

IRS Auto Depreciation Limits Released for 2013

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The IRS recently released Rev. Proc. 2013-21 detailing the updated price inflation adjustment limitations on depreciation deductions and lease inclusion amounts for passenger automobiles first placed in service during calendar year 2013. These adjustments are required under Internal Revenue Code Section 280F. If you need advice relating to these matters, or any other tax or legal issues, please contact Sherayzen Law Office, PLLC.

Relevant Definitions

According to the IRS, “Passenger automobiles are defined in section 280F(d)(5)(A) as any 4-wheeled vehicle which is manufactured primarily for use on public streets, roads, and highways, and which is rated at 6,000 pounds unloaded gross vehicle weight (or, in the case of a truck or van, 6,000 pounds gross vehicle weight) or less. Section 280F(d)(5)(B) provides exceptions from this definition, and allows the Secretary to promulgate regulations to exclude trucks and vans from the definition of passenger automobiles” (Internal Revenue Bulletin: 2003-37).

Limits for Passenger Automobiles (Excluding Trucks and Vans)

The depreciation limitations for passenger automobiles (not including trucks or vans) first placed in service during calendar year 2013, and for which the additional bonus depreciation applies (allowing for 50% “expensing” of the cost of the automobile in the year of purchase), is $11,160 for the first tax year. The amounts for following years are: $5,100 the second tax year, $3,050 for the third year, and $1,875 for each succeeding year. Note that, for this category and for each category that follows below, any personal use of a passenger automobile, truck or van will reduce the maximum depreciation deduction that may be taken by a business.

As will be seen from the deduction amounts listed below, only the first year of depreciation is affected by the adjustments.

For passenger automobiles (excluding trucks and vans) placed in service during calendar year 2013 to which 50% bonus depreciation does not apply, the depreciation is $3,160 for the first tax year. For the following years, the amounts are: $5,100 the second tax year, $3,050 for the third year, and $1,875 for each succeeding year.

Limits for Trucks and Vans

The depreciation limitations for trucks and vans first placed in service during calendar year 2013, and to which the additional 50% bonus depreciation applies, is slightly higher than passenger automobiles, at $11,360 for the first tax year. For later years, the amounts are: $5,400 the second tax year, $3,250 for the third year, and $1,975 for each succeeding year.

The depreciation limitations for trucks and vans first placed in service during calendar year 2013, and to which the additional 50% bonus depreciation does not apply, is $3,360 for the first tax year. For later years, the amounts are: $5,400 the second tax year, $3,250 for the third year, and $1,975 for each succeeding year.

Bonus Depreciation

Rev. Proc. 2013-21 includes various factors as to why bonus depreciation may not apply, including the fact that a taxpayer, “(1) purchased the passenger automobile used; (2) did not use the passenger automobile during 2013 more than 50 percent for business purposes; (3) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(2)(D)(iii); or (4) elected to increase the § 53 AMT credit limitation in lieu of claiming § 168(k) additional first year depreciation.” If a passenger automobile, truck or van is not used at least 50% of the time for business purposes, the vehicle must be depreciated under standard straight-line ADS rules.
The Rev. Proc. also includes updated tables for the dollar amount of income inclusion for passenger automobiles (excluding trucks and vans), and separate tables for trucks and vans with a lease terms beginning calendar year 2013.

Second Quarter of 2012 Underpayment and Overpayment Interest Rates

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On February 23, 2012, the IRS announced that the underpayment and overpayment interest rates will remain the same for the calendar quarter beginning April 1, 2012. The rates will be:

  • three (3) percent for overpayments (two (2) percent in the case of a corporation)
  • three (3) percent for underpayments
  • five (5) percent for large corporate underpayments
  • one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points.

The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

Notice 88-59, 1988-1 C.B. 546, announced that, in determining the quarterly interest rates to be used for overpayments and underpayments of tax under section 6621, the Internal Revenue Service will use the federal short-term rate based on daily compounding because that rate is most consistent with section 6621 which, pursuant to section 6622, is subject to daily compounding.

Interest factors for daily compound interest for annual rates of 0.5 percent are published in Appendix A of Revenue Ruling 2011-32. Interest factors for daily compound interest for annual rates of 2 percent, 3 percent and 5 percent are published in Tables 7, 9, 11, and 15 of Rev. Proc. 95-17, 1995-1 C.B. 561, 563, 565, and 569.

Tax Return Extension Deadline for Most Filers: October 17, 2011 and Some Exceptions

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October 17, 2011 is the deadline for most of those individual taxpayers who filed Form 4868 to request a six-month extension on filing of their tax returns. Traditionally, October 15 would have been the deadline, but it falls on Saturday this year. Therefore, the IRS extended the deadline until October 17, 2011.

Note that this deadline of October 17, 2011, includes U.S. taxpayers living abroad, even though their tax filing deadline is automatically extended to June 15. It is also important to emphasize that the extension to file your federal tax return does not in any way affect the obligation to file the FBARs by June 30, 2011.

Some taxpayers, however, are not subject to October 17, 2011 deadline this year. The two most prominent exceptions are qualified military personnel and victims of Hurricane Irene. Victims of Hurricane Irene will have until October 31, 2011 to file their tax returns. The new deadline primarily concerns residents of certain counties in Connecticut, Massachusetts, North Carolina, New Hampshire, New Jersey, New York, Pennsylvania, Puerto Rico, Texas, and Vermont.

It is important to emphasize that an extension of time to file is not equivalent to an extension of time to pay. It is generally true that, under the relevant Treasury regulations and IRS Notice 93-22, individual taxpayers still can file a valid Form 4868 and obtain an automatic extension without paying the properly estimated tax in full – this means, of course, that no late filing penalty is likely to be assessed. However, the taxpayers will still owe interest on any past due tax amount and may be subject to a late payment penalty if payment is not made by the regular due date of the return.

Underpayment and Overpayment Interest Rates for the Fourth Quarter of 2011

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On August 18, 2011, the Internal Revenue Service announced that interest rates will decrease for the calendar quarter beginning October 1, 2011. The rates will be:

  • three (3) percent for overpayments (two (2) percent in the case of a corporation);
  • three (3) percent for underpayments;
  • five (5) percent for large corporate underpayments; and
  • zero and one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.

Section 6621 of the Internal Revenue Code establishes the rates for interest on tax overpayments and tax underpayments. These rates determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Rev. Rul. 2011-18. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. Pursuant to I.R.C. section 6621(c), the rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. See section 301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.

The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

Notice 88-59, 1988-1 C.B. 546, announced that, in determining the quarterly interest rates to be used for overpayments and underpayments of tax under section 6621, the Internal Revenue Service will use the federal short-term rate based on daily compounding because that rate is most consistent with section 6621 which, pursuant to section 6622, is subject to daily compounding.

Interest factors for daily compound interest for annual rates of 1.5 percent, 3 percent, 4 percent and 6 percent are published in Tables 8, 11, 13, and 17 of Rev. Proc. 95-17, 1995-1 C.B. 556, 562, 567, and 571. Interest factors for daily compound interest for an annual rate of 0.5 percent are published in Appendix A of Revenue Ruling 2010-31, 2010-52 IRB 898, 899. 3.

Contact Sherayzen Law Office

If you have any questions with respect to IRS interest rates and any other tax-related concerns, you should contact our experienced tax firm to discuss your case.