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Payroll taxes and rates: wage bases and limits-Multiple Years

January 15, 2015 • Jeff Cecchini • Comments Off on Payroll taxes and rates: wage bases and limits-Multiple Years

Taxes and rates: wage bases and limits

Article ID: 2000093
 Source: http://payroll.intuit.com/support/kb/2000093.html

Overview

This article is about the rates and limits for Social Security, Medicare, federal income tax (FIT), state income tax (SIT), and state unemployment income (SUI).

Assumptions

You have employees subject to federal taxes.

Details

Wage base limits for DIY and Assisted payroll are updated by the tax table, and cannot be manually changed. To update the wage base limit for a tax for current period download the latest payroll updates.

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2015 tax rate and wage base table

2015 – Tax Rate and Wage Base
Tax Federal
or
State		 ER EE Wage
Limit		 Max Tax ER Max Tax EE
Social Security Federal 6.2% 6.2% $118,500.00 $7,347 $7,347
Medicare Federal See table below. NO MAX NO MAX
Federal Income Tax Federal N/A Varies NO LIMIT N/A NO MAX
FUTA Federal 0.6% N/A $7,000.00 $42.00 N/A
State Income Tax State N/A Varies NO LIMIT N/A NO MAX
State Unemployment State Varies Varies Varies Varies Varies

Medicare:

Employee Medicare Wages Employee Tax Rate Employer Tax Rate
Wages equal or less than $200,000 1.45% 1.45%
Wages greater than $200,000 2.35% (1.45% + 0.9%) 1.45%

See the IRS FAQ Questions and Answers for the Additional Medicare Tax for more information.

2014 tax rate and wage base table

2014 – Tax Rate and Wage Base
Tax Federal
or
State		 ER EE Wage
Limit		 Max Tax ER Max Tax EE
Social Security Federal 6.2% 6.2% $117,000.00 $7,254 $7,254
Medicare Federal See table below. NO MAX NO MAX
Federal Income Tax Federal N/A Varies NO LIMIT N/A NO MAX
FUTA Federal 0.6% N/A $7,000.00 $42.00 N/A
State Income Tax State N/A Varies NO LIMIT N/A NO MAX
State Unemployment State Varies Varies Varies Varies Varies

Medicare:

Employee Medicare Wages Employee Tax Rate Employer Tax Rate
Wages equal or less than $200,000 1.45% 1.45%
Wages greater than $200,000 2.35% (1.45% + 0.9%) 1.45%

See the IRS FAQ Questions and Answers for the Additional Medicare Tax for more information.

2013 tax rate and wage base table

2013 – Tax Rate and Wage Base
Tax Federal
or
State		 ER EE Wage
Limit		 Max Tax ER Max Tax EE
Social Security Federal 6.2% 6.2% $113,700.00 $7,049.40 $7,049.40
Medicare Federal See table below. NO MAX NO MAX
Federal Income Tax Federal N/A Varies NO LIMIT N/A NO MAX
FUTA Federal 0.6% N/A $7,000.00 $42.00 N/A
State Income Tax State N/A Varies NO LIMIT N/A NO MAX
State Unemployment State Varies Varies Varies Varies Varies

Medicare:

Employee Medicare Wages Employee Tax Rate Employer Tax Rate
Wages equal or less than $200,000 1.45% 1.45%
Wages greater than $200,000 2.35% (1.45% + 0.9%) 1.45%

See the IRS FAQ Questions and Answers for the Additional Medicare Tax for more information.

2012 tax rate and wage base table

2012 – Tax Rate and Wage Base
Tax Federal
or
State		 ER EE Wage
Limit		 Max Tax ER Max Tax EE
Social Security Federal 6.2% 4.2% $110,100.00 $6,826.20 $4,624.20
Medicare Federal 1.45% 1.45% NO LIMIT NO MAX NO MAX
Federal Income Tax Federal N/A Varies NO LIMIT N/A NO MAX
FUTA Federal 0.6% N/A $7,000.00 $42.00 N/A
State Income Tax State N/A Varies NO LIMIT N/A NO MAX
State Unemployment State Varies Varies Varies Varies Varies

2011 tax rate and wage base table

2011 – Tax Rate and Wage Base
Tax Federal
or
State		 ER EE Wage
Limit		 Max Tax ER Max Tax EE
Social Security Federal 6.2% 4.2% $106,800.00 $6,621.60 $4,485.60
Medicare Federal 1.45% 1.45% NO LIMIT NO MAX NO MAX
Federal Income Tax Federal N/A Varies NO LIMIT N/A NO MAX
FUTA (after 6/30) Federal 0.6% N/A $7,000.00 $42.00 N/A
FUTA (before 7/1) Federal 0.8% N/A $7,000.00 $56.00 N/A
State Income Tax State N/A Varies NO LIMIT N/A NO MAX
State Unemployment State Varies Varies Varies Varies Varies

Notes:

  • For more information about Social Security and Medicare, visit the Social Security Administration web site.
  • For information about state taxes, visit your state tax agency’s official web site.
  • If you earned more than the maximum in any year but had only one job, the amount shown in the Your Taxed Social Security Earnings column is only the maximum amount. If you had more than one job, the total that is recorded can be more than the maximum. However, only the maximum amount is used to calculate your benefit estimates.
  • When you have more than one job in a year, each of your employers must withhold SS taxes without regard to what other employers withhold. Your total withheld Social Security taxes can be in excess of the limit. This extra amount can be refunded to you after you file your personal income taxes at the end of the year.
In CA Payroll Taxes, IRS Tax Info, Payroll, Payroll Taxes, SD Payroll Taxes

South Dakota’s Minimum Wage Increases to $8.50/hr on 01/01/2015

January 12, 2015 • Jeff Cecchini • Comments Off on South Dakota’s Minimum Wage Increases to $8.50/hr on 01/01/2015

South Dakota’s Minimum Wage Increases to $8.50/hr on 01/01/2015

https://dlr.sd.gov/wagehrs/minimumwage.aspx

In Payroll, SD Wage & Hour, Wage & Hour Rules

Fair Labor Standards Act (FLSA) Minimum Wage Poster

January 12, 2015 • Jeff Cecchini • Comments Off on Fair Labor Standards Act (FLSA) Minimum Wage Poster

http://www.dol.gov/whd/regs/compliance/posters/flsa.htm

In CA Wage & Hour, Human Resources, Payroll, SD Wage & Hour, Wage & Hour Rules

Minimum Wage Laws in the States

January 12, 2015 • Jeff Cecchini • Comments Off on Minimum Wage Laws in the States

http://www.dol.gov/whd/minwage/america.htm

In CA Wage & Hour, Human Resources, Payroll, SD Wage & Hour, Wage & Hour Rules

For 2015 Social Security Wage Base increases to $118,500

January 12, 2015 • Jeff Cecchini • Comments Off on For 2015 Social Security Wage Base increases to $118,500

Social Security’s Old-Age, Survivors, and Disability Insurance (OASDI) program limits the amount of earnings subject to taxation for a given year. The same annual limit also applies when those earnings are used in a benefit computation. This limit changes each year with changes in the national average wage index. We call this annual limit the contribution and benefit base. For earnings in 2015, this base is $118,500.

The OASDI tax rate for wages paid in 2015 is set by statute at 6.2 percent for employees and employers, each. Thus, an individual with wages equal to or larger than $118,500 would contribute $7,347.00 to the OASDI program in 2015, and his or her employer would contribute the same amount. The OASDI tax rate for self-employment income in 2015 is 12.4 percent.

For Medicare’s Hospital Insurance (HI) program, the taxable maximum was the same as that for the OASDI program for 1966-1990. Separate HI taxable maximums of $125,000, $130,200, and $135,000 were applicable in 1991-93, respectively. After 1993, there has been no limitation on HI-taxable earnings. Tax rates under the HI program are 1.45 percent for employees and employers, each, and 2.90 percent for self-employed persons.

Source: http://www.socialsecurity.gov/OACT/COLA/cbb.html

In CA Payroll Taxes, Payroll, Payroll Taxes, SD Payroll Taxes

IRS Announces 2015 Pension Plan Limitations

January 12, 2015 • Jeff Cecchini • Comments Off on IRS Announces 2015 Pension Plan Limitations

WASHINGTON — The Internal Revenue Service today announced cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2015. Many of the pension plan limitations will change for 2015 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However, other limitations will remain unchanged because the increase in the index did not meet the statutory thresholds that trigger their adjustment. Highlights include the following:

  • The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000.
  • The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $183,000 and $193,000, up from $181,000 and $191,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA is $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014. For singles and heads of household, the income phase-out range is $116,000 to $131,000, up from $114,000 to $129,000. For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
  • The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $61,000 for married couples filing jointly, up from $60,000 in 2014; $45,750 for heads of household, up from $45,000; and $30,500 for married individuals filing separately and for singles, up from $30,000.

Below are details on both the adjusted and unchanged limitations.

Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans. Section 415(d) requires that the Secretary of the Treasury annually adjust these limits for cost‑of‑living increases. Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415. Under Section 415(d), the adjustments are to be made under adjustment procedures similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.

Effective Jan. 1, 2015, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) remains unchanged at $210,000. For a participant who separated from service before January 1, 2015, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2014, by 1.0178.

The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2015 from $52,000 to $53,000.

The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A). After taking into account the applicable rounding rules, the amounts for 2015 are as follows:

The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased from $17,500 to $18,000.

The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C) and 408(k)(6)(D)(ii) is increased from $260,000 to $265,000.

The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $170,000.

The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5‑year distribution period is increased from $1,050,000 to $1,070,000, while the dollar amount used to determine the lengthening of the 5‑year distribution period remains unchanged at $210,000.

The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $115,000 to $120,000.

The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over is increased from $5,500 to $6,000. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over is increased from $2,500 to $3,000.

The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost‑of‑living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, is increased from $385,000 to $395,000.

The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) is increased from $550 to $600.

The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $12,000 to $12,500.

The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $17,500 to $18,000.

The compensation amount under Section 1.61‑21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation remains unchanged at $105,000. The compensation amount under Section 1.61‑21(f)(5)(iii) is increased from $210,000 to $215,000.

The Code also provides that several retirement-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3). After taking the applicable rounding rules into account, the amounts for 2015 are as follows:

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $36,000 to $36,500; the limitation under Section 25B(b)(1)(B) is increased from $39,000 to $39,500; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $60,000 to $61,000.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing as head of household is increased from $27,000 to $27,375; the limitation under Section 25B(b)(1)(B) is increased from $29,250 to $29,625; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $45,000 to $45,750.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers is increased from $18,000 to $18,250; the limitation under Section 25B(b)(1)(B) is increased from $19,500 to $19,750; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $30,000 to $30,500.

The deductible amount under Section 219(b)(5)(A) for an individual making qualified retirement contributions remains unchanged at $5,500.

The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $96,000 to $98,000. The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $60,000 to $61,000. The applicable dollar amount under Section 219(g)(3)(B)(iii) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0. The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $181,000 to $183,000.

The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $181,000 to $183,000. The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $114,000 to $116,000. The applicable dollar amount under Section 408A(c)(3)(B)(ii)(III) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.

The dollar amount under Section 430(c)(7)(D)(i)(II) used to determine excess employee compensation with respect to a single-employer defined benefit pension plan for which the special election under Section 430(c)(2)(D) has been made is increased from $1,084,000 to $1,101,000.

Source: http://www.irs.gov/uac/Newsroom/IRS-Announces-2015-Pension-Plan-Limitations;-Taxpayers-May-Contribute-up-to-$18,000-to-their-401(k)-plans-in-2015

In IRS Tax Info, Payroll

Accountable Plan Expense Reimbursements

December 15, 2014 • Jeff Cecchini • Comments Off on Accountable Plan Expense Reimbursements

From IRS Publication 15 (2014) http://www.irs.gov/pub/irs-pdf/p15.pdf

Employee business expense reimbursements. A reimbursement or allowance arrangement is a system by which you pay the advances, reimbursements, and charges for your employees’ business expenses. How you report a reimbursement or allowance amount depends on whether you have an accountable or a nonaccountable plan. If a single payment includes both wages and an expense reimbursement, you must specify the amount of the reimbursement. These rules apply to all ordinary and necessary employee business expenses that would otherwise qualify for a deduction by the employee. Accountable plan. To be an accountable plan, your reimbursement or allowance arrangement must require your employees to meet all three of the following rules.

1. They must have paid or incurred deductible expenses while performing services as your employees. The reimbursement or advance must be paid for the expense and must not be an amount that would have otherwise been paid by the employee.
2. They must substantiate these expenses to you within a reasonable period of time.
3. They must return any amounts in excess of substantiated expenses within a reasonable period of time.

Amounts paid under an accountable plan are not wages and are not subject to income, social security, Medicare, and FUTA taxes. If the expenses covered by this arrangement are not substantiated (or amounts in excess of substantiated expenses are not returned within a reasonable period of time), the amount paid under the arrangement in excess of the substantiated expenses is treated as paid under a nonaccountable plan. This amount is subject to income, social security, Medicare, and FUTA taxes for the first payroll period following the end of the reasonable period of time.

A reasonable period of time depends on the facts and circumstances. Generally, it is considered reasonable if
your employees receive their advance within 30 days of the time they incur the expenses, adequately account for the expenses within 60 days after the expenses were paid or incurred, and return any amounts in excess of expenses within 120 days after the expenses were paid or incurred. Also, it is considered reasonable if you give your employees a periodic statement (at least quarterly) that asks them to either return or adequately account for outstanding amounts and they do so within 120 days.

Nonaccountable plan. Payments to your employee for travel and other necessary expenses of your business under a nonaccountable plan are wages and are treated as supplemental wages and subject to income, social security, Medicare, and FUTA taxes. Your payments are treated as paid under a nonaccountable plan if:

• Your employee is not required to or does not substantiate timely those expenses to you with receipts or other documentation,

• You advance an amount to your employee for business expenses and your employee is not required to or does not return timely any amount he or she does not use for business expenses,

• You advance or pay an amount to your employee regardless of whether you reasonably expect the employee to have business expenses related to your business, or

• You pay an amount as a reimbursement you would have otherwise paid as wages.

In CA Payroll Taxes, IRS Tax Info, Payroll, Payroll Taxes, SD Payroll Taxes

QuickBooks Payroll: FAQs for 2014 FUTA Credit Reduction States

December 15, 2014 • Jeff Cecchini • Comments Off on QuickBooks Payroll: FAQs for 2014 FUTA Credit Reduction States

This article explains how the Federal Unemployment Tax Act (FUTA) credit reduction affects your FUTA taxes, Form 940, and Schedule A for 2014.

http://payroll.intuit.com/support/kb/1000921.html

In CA Payroll Taxes, IRS Tax Info, Payroll, Payroll Taxes

2014 Federal Unemployment Tax Act (FUTA) Credit Reductions

December 14, 2014 • Jeff Cecchini • Comments Off on 2014 Federal Unemployment Tax Act (FUTA) Credit Reductions

FUTA Credit Reduction

What is a credit reduction state?

A state is a credit reduction state if it has taken loans from the federal government to meet its state unemployment benefits liabilities and has not repaid the loans within the allowable time frame. A reduction in the usual credit against the full FUTA tax rate means that employers paying wages subject to UI tax in those states will owe a greater amount of tax.

The FUTA tax levies a federal tax on employers covered by a state’s UI program. The standard FUTA tax rate is 6.0% on the first $7,000 of wages subject to FUTA. The funds from the FUTA tax create the Federal Unemployment Trust Fund, administered by the United States Department of Labor (DOL).

Generally, employers may receive a credit of 5.4% when they file their Form 940 (PDF), Employer’s Annual Federal Unemployment (FUTA) Tax Return, to result in a net FUTA tax rate of 0.6% (6.0% – 5.4% = 0.6%).

Some states take Federal Unemployment Trust Fund loans from the federal government if they lack the funds to pay UI benefits for residents of their states.

If a state has outstanding loan balances on January 1 for two consecutive years, and does not repay the full amount of its loans by November 10 of the second year, the FUTA credit rate for employers in that state will be reduced until the loan is repaid.

The reduction schedule is 0.3% for the first year the state is a credit reduction state, another 0.3% for the second year, and an additional 0.3% for each year thereafter that the state has not repaid its loan in full.  Additional offset credit reductions may apply to a state beginning with the third and fifth taxable years if a loan balance is still outstanding and certain criteria are not met.

DOL runs the loan program and announces any credit reduction states after the November 10 deadline each year. DOL has information about the credit reduction states and loan balances on theUI Statistics page of its Department of Labor website.

How does the credit reduction affect employment taxes?

The result of being an employer in a credit reduction state is a higher tax due on the Form 940.

For example, an employer in a state with a credit reduction of 0.3% would compute its FUTA tax by reducing the 6.0% FUTA tax rate by a FUTA credit of only 5.1% (the standard 5.4% credit minus the 0.3% credit reduction) for an effective FUTA tax rate of 0.9% for the year.

Any increased FUTA tax liability due to a credit reduction is considered incurred in the fourth quarter and is due by January 31 of the following year.

Employers who think they may be in a credit reduction state should plan accordingly for the lower credit. The IRS includes the credit reduction states, the applicable credit reduction rates, and an example in the Schedule A (Form 940) (PDF), Multi-State Employer and Credit Reduction Information. The Instructions for Form 940 (PDF) also has information about the credit reduction and deposit rules.

Reporting the credit reduction

Employers calculate the credit reduction using the Schedule A (Form 940). The schedule was revised in 2011 to allow for the growth in the number of credit reduction states and for the calculation of the increased FUTA tax liability.

On Schedule A (Form 940), every state has:

  • A checkbox (to be checked if an employer paid state unemployment taxes to that state)
  • A box for the FUTA taxable wages the employer paid in that state (to be filled in if the state is a credit reduction state and the employer paid wages subject to UI tax in the state).

The following employers use the Schedule A (Form 940):

  • Employers that paid FUTA taxable wages and UI tax in more than one state
  • Employers that paid FUTA taxable wages and UI tax in any credit reduction state, even if the employer is a single-state employer. These employers report the FUTA taxable wages and multiply by the credit reduction rate (0.3%, 0.6%, 0.9%, etc) to calculate the total credit reduction, which the employer carries forward to Form 940.

If an employer paid UI taxes to more than one state, it must check all of those states on Schedule A (Form 940), whether the states are credit reduction states or not. Additionally, for states that are credit reduction states, employers must enter the FUTA taxable wages the employer paid in that state, even if the employer paid wages in only one state. However, FUTA taxable wages that are excluded from UI are not subject to credit reduction. For more information, see the Instructions forSchedule A (Form 940) (PDF).

Source: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/FUTA-Credit-Reduction

In CA Payroll Taxes, Payroll Taxes

IRS Announces 2015 Standard Mileage Rate

December 12, 2014 • Jeff Cecchini • Comments Off on IRS Announces 2015 Standard Mileage Rate

IR-2014-114, Dec. 10, 2014

WASHINGTON — The Internal Revenue Service today issued the 2015 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2015, the standard mileage rates for the use of a car, van, pickup or panel truck will be:

  • 57.5 cents per mile for business miles driven, up from 56 cents in 2014
  • 23 cents per mile driven for medical or moving purposes, down half a cent from 2014
  • 14 cents per mile driven in service of charitable organizations

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.

Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after claiming accelerated depreciation, including the Section 179 expense deduction, on that vehicle. Likewise, the standard rate is not available to fleet owners (more than four vehicles used simultaneously). Details on these and other special rules are in Revenue Procedure 2010-51, the instructions to Form 1040 and various online IRS publications including Publication 17, Your Federal Income Tax.

Besides the standard mileage rates, Notice 2014-79, posted today on IRS.gov, also includes the basis reduction amounts for those choosing the business standard mileage rate, as well as the maximum standard automobile cost that may be used in computing an allowance under a fixed and variable rate plan.

Source: http://www.irs.gov/uac/Newsroom/New-Standard-Mileage-Rates-Now-Available;-Business-Rate-to-Rise-in-2015

In IRS Tax Info