$4 per gallon gas prompts increase in IRS mileage rates

I just got back from a story interview on the other side of Austin. The round trip was 47.8 miles.

So you can imagine my delight, upon returning to my office, in learning that the IRS today hiked the optional standard business mileage rate by 8 cents.

I was not, however, so pleased to discover upon closer reading of my tax news e-mails that my business travel earlier this afternoon can't be counted under the new 58.5 cents per mile rate. The higher calculation level doesn't kick in until July 1.

Guess I'll be pushing off any further face-to-face interviews, where practical, until after that date!

The IRS said it made the special adjustment to the optional standard rates because of the recent gasoline price increases nationwide.

Other travel rates hiked, too: In addition to bumping the per-mile rate for business-related travel from 50.5 cents to 58.5 cents, the rate to compute medical and moving mileage also will increase on July 1 from 19 cents per mile to 27 cents per mile.

The charitable driving deduction rate for the final six months of 2008, however, will remain at 14 cents per mile. Don't get mad at the IRS. That write-off rate is determined by law, not left to the discretion of the IRS based on fuel price fluctuations.

As I've said before, tell your Senators and Representative how unfair you think it is for charitable miles to be locked in at such a low reimbursement rate.

You might want to copy the table below and/or bookmark this post as a reminder of the multiple calculations you'll have to make when computing mileage deductions on you 2008 tax return. The new rates also are detailed in Announcement 2008-63.

2008 Mileage Rates

Purpose	Rates Jan. 1 through June 30	Rates July 1 through Dec 31
Business	50.5 cents	58.5 cents
Medical or Moving	19 cents	27 cents
Charitable	14 cents	14 cents

Remember, when you have eligible business travel, you can use the optional standard mileage rate to compute deductible costs of using your auto in lieu of tracking actual costs. Tax Topic #510 has more details on writing off business use of a vehicle.

Tax answer to driver pleas: The IRS usually updates the mileage rates once a year, typically in the fall for the next calendar year. The 2008 figures we started the year with were issued late last November.

But some folks thought that was too long to wait and recently had asked the IRS for relief in this area.

On June 13, the National Treasury Employees Union urged the IRS to make a midyear mileage rate adjustment because of record, and still rising, gas prices. According to the Department of Energy's Energy Information Administration (say that three times fast!), since the 2008 reimbursement rates were announced last year, the price of a gallon of gasoline in the U.S. has risen 31.2 percent, from $3.079 to $4.039.

 In addition, The Tax Foundation reported that Minnesota Senator Norm Coleman made a similar request to the IRS. 

The IRS got the message.

"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."

Gasoline prices are the most significant consideration in changing the mileage rates, but the IRS notes that other things, such as vehicle depreciation, insurance and "other fixed and variable costs," also are used to determine the mileage figures.

Comments

[jason wilson]

i am a private investigator and my boss only pays me 34 cents a mile is theire a law saying he has to pay the newest milage rate.

[taxguru]

There is an exciting new business tool provided by http://www.MileageLogger.com that will help you capture your business mileage automatically, no need for pen and paper. It's absolutely hands free and all your business mileage records are available online. I think is something that might help you get a bigger deduction since it will capture all your mileage for your business.

[Kay]

James,
I'm sorry to say that it looks like you're just plain out of luck here. While the IRS rate is used as a benchmark by the federal government and many businesses to reimburse their employees for mileage, there's no law saying private companies have to match the federal rate. Some states do have laws about such reimbursement; check with your state's department of labor to see if that applies in your case.
Kay

[James Bradley]

The recent change in IRS mileage allowances has made me consider my employers use of the mileage rates. Currently, my employer only pays the employees $0.385/Mile for legitimate business miles in personal vehicles. When asked about the additional 12-cents, I was told that it was somewhat of a handling charge. I am a MBA graduate but only have an elementary command of tax accounting so I pose it to the professionals: Is this even legal?

I am lucky to have a steady job in the economic times are nation is battling. I can’t help but cry foul, especially when gas is $4/Gallon.