Mon, June 30, 2008
IRS Raises Business Mileage Rate For Last Half Of 2008
The IRS announced last week that the business mileage rate, often used to determine the deduction for business use of a car, will go up effective July 1st.
The IRS rate is also often used by companies to determine how much they’ll reimburse their employees for business mileage. The business mileage rate will go from 50.5 cents/mile to 58.5 cents/mile; the old rate will apply to mileage driven in the first six months of 2008 and the new rate applies thereafter.
The IRS maintains separate mileage rates for deductible medical or moving expenses as well as a third rate that applies to individuals who provide services to charities. The new medical/moving expense rate goes from 19 cents a mile to 27 cents/mile. The charitable mileage rate is set by statute at 14 cents/mile, so it remains unchanged. Obviously, as the price of gas continues to climb, the charitable mileage deduction becomes less and less rewarding for people who are entitled to it; in this case, it really is true that no good deed goes unpunished.
Although the latest IRS notice says that gasoline prices are not the only factor in the determination of the rate, the fact that the IRS is making a mid-year increase makes it clear that gas prices are driving the bump in the rates. The IRS typically sets a new rate once a year, although it did make a gas-price-related increase in 2005 effective in Q3 of that year.