The Optional Standard Mileage Rate is 53.5 cents per mile for 2017. The depreciation component for business mileage is 25 cents per mile in 2017. The rate for medical and moving mileage is 17.0 cents per mile for the year and charitable mileage rate remains at 14 cents per mile in 2017.

A deduction using the optional rate is in lieu of automobile operating and fixed costs that are allocable to business use. These include depreciation, maintenance and repairs, tires, gasoline, oil, insurance, and registration fees. Parking fees and tolls attributable to using the automobile for business purposes may be deducted as separate items, but fuel and repairs are NOT deductible.

 

Depreciation Methods for Farmers. For property placed in service, farmers must use the following depreciation methods: 1. The 150 percent declining balance method over the GDS recovery period switching to the straight line method when that method yields a greater deduction. 2. The straight line method over the GDS recovery period. 3. The 150 percent declining balance method over fixed ADS recovery periods, switching to the straight line method when that method provides a greater deduction. 4. The straight line method over fixed ADS recovery periods. NOTE: We have discovered that many tax returns have been filed incorrectly using the 200 percent declining balance method, and/or the incorrect recovery period. Use Form 3115 to correct depreciation.

 

Depreciation Limits for Passenger Automobiles. The passenger automobile category includes trucks and vans with gross vehicle weights of 6,000 pounds or less. For passenger automobiles, light trucks and vans placed in service in 2017, the maximum annual depreciation allowed is as follows:

Cars                 Light Trucks/Vans

Year                                        Amount           Amount

First tax year                         $3,160             $3,560

Second tax year                    $5,100             $5,700

Third tax year                        $3,050             $3,450

Each succeeding tax year    $1,875             $2,075

 

The maximum ceiling assumes 100 percent business use of the automobile. If business use is less, the ceiling is proportionately reduced. For example, if an automobile were driven 60 percent for business, the deduction would be limited to $1,896 ($3,160 x 60 percent). First year Bonus depreciation of $8,000 is available if new.

 

Deduction of Organization Dues. The 1993 Tax Act prohibited deductions for amounts paid after 1993 for any membership in any club organized for business, pleasure, recreation, or other social purposes. Newly issued regulations define a "club" as any membership organization whose principal activity is to provide members access to entertainment facilities. Membership in professional organizations, business leagues, trade associations, and chambers of commerce would not be considered to be organized for pleasure. As such, dues for membership in various farm organizations, trade associations, etc. should be deductible.

 

Deductions for Meals. Beginning in 1998, 100 percent of the cost of business meals for employees is deductible if meals are at and for the convenience of the employer, no longer limited to 50%.

 

Business Trip Expenses. Beginning January 1, 1994, business trip expenses for a taxpayers' spouse, dependents or other individuals cannot be deducted unless those individuals are bona fide employees traveling with the taxpayer for a business purpose.