The Internal Revenue Service is trying to cope with rising gas prices by increasing the optional standard mileage rates that taxpayers can use to calculate the deductible costs of operating an automobile.
The change will take effect on July 1, earlier than usual. The rate will increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through Dec. 31, 2008, an increase of 8 cents from the 50.5 cent rate in effect for the first six months of 2008, as set forth in Rev. Proc. 2007-70.
The IRS made the special adjustment for the final months of 2008 in recognition of recent gasoline price increases. It normally updates the mileage rates once a year in the fall for the next calendar year.
While gasoline is a significant factor in the mileage figure, other items also enter into the calculation of mileage rates, such as depreciation, insurance, and other fixed and variable costs, the IRS noted.
The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business purposes through the end of the year 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.
The new six-month rate for computing deductible medical or moving expenses will also increase by 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. Taxpayers also have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.