09 Jul

IRS Increase Mileage Rates through December 31, 2008

July 09, 2008

The IRS normally updates the mileage rates once a year in the fall for the next calendar year; however, with fuel prices at record highs the Service decided to act midyear.  The standard mileage rate for business usage will be increased to 58.5¢ for the second half of the year, up from 50.5¢ for the first half of the year.   This rate applies for all business miles driven from July 1, 2008, through Dec. 31, 2008.  This makes the 2008 standard mileage rate the highest ever!

In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2008. “Rising gas prices are having a major impact on individual Americans. Given the increase in prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile,” said IRS Commissioner Doug Shulman. “We want the reimbursement rate to be fair to taxpayers.”

The new six-month rate for computing deductible medical or moving expenses will also increase by eight (8) cents to 27 cents a mile, up from 19 cents for the first six months of 2008. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation, insurance, and other fixed and variable costs.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Mileage Rate Changes
Purpose

Rates 1/1 through 6/30/08

Rates 7/1 through 12/31/08

Business

50.5

58.5

Medical/Moving

19

27

Charitable

14

14

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