Gas prices are rising. Will the IRS hike its standard mileage rate to match them?

Earlier this year, my mother moved nearer to me. The good news is that she's now just about an hour away.

But with gas prices shooting up, I'm going to have start measuring the distance between us by gallons.

It's no secret that gasoline would cost more as we neared the summer vacation travel season. But the ongoing unrest in the oil-producing nation of Libya has accelerated the gas price jump, even though that country directly supplies the United States with a negligible amount of fuel oil.

The bottom line, whatever the cause, is that in some U.S. cities, a gallon of gas has already hit $4.

Find your area's gas prices at GasBuddy.com.

Now I know that what you and I pay to drive is nothing when compared to the loss of life during the recent and ongoing uprisings. But the fact is that more people will notice their gasoline bills before they pay close attention to what is going on half a world away and why. 

So we deal with our relatively mundane fuel concerns.

But for people who already are having some financial issues and rely on their autos to get and from work, the worries about fuel prices are, in fact, pretty serious. In many cases, drving is their work, as is the case for taxi drivers and delivery companies.

Deductible driving: The one only good thing about the cost of driving is that the IRS allows us to deduct our qualifying business travel expenses.

For driving costs, we can deduct our vehicles' actual expenses. A lot of us, however, take the simpler tax deduction route and use the standard mileage rate that the tax agency adjusts each fall to reflect inflation and the fixed and variable costs of operating an automobile.

For the 2011 tax year, the rate for business travel is 51 cents per mile.

Back when the IRS set the current mileage rate, vehicular related inflation was low. In fact, the 51 cents is just a penny more than the rate for 2010.

But a lot of folks are now flashing back to 2008, the last time gas pump prices spiked so dramatically.

That year, $4 per gallon gas also was a reality. And the IRS responded by changing the mileage deduction rates early.

In June of 2008, the IRS decided that its 50.5 cents per mile deduction rate was not sufficient for the rising cost of gas. It increased the business mileage rate on July 1 to 58.5 cents per mile for the last six months of the year.

Mileage rates for medical and moving travel also were increased at the year's halfway point. The rate for charitable miles is set by statute at 14 cents per mile.

Sure, that made filing 2008 returns a bit more complicated, what with having to figure dual mileage rates. But no one really complained about the extra tax-filing work.

Folks are complaining now, however. So if the unrest in the Middle East and North Africa continues, keeping pump prices high (whether they should or not), I wouldn't be surprised to see the IRS make a mid-year mileage rate change again.

Myriad mileage rates: While the 2008 mileage rate change is freshest in our collective driving and tax-paying memories, it's not that unusual for the IRS and/or Congress to make changes to the rate in response to extraordinary circumstances.

From Sept. 1, 2005, through the end of that year, there was a special, higher charitable mileage rate to reflect the costs of relief-effort driving in areas devastated by Hurricane Katrina. The multiple storm-related mileage rates continued through 2006.

If you'd like to see what the IRS has allowed for mileage deductions over the year, the tax agency keeps online track of the mileage rates since 1997.

Related posts:

• Mileage tax deduction rates for tax years 2010 and 2011
• $4 gas prompts increase in IRS mileage rates (2008)
• Corporate mileage rate variations
• Hitting the highway with Uncle Sam's help
• Brakes applied to mileage tax

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