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The IRS Helps With Gas Prices
In recognition of recent increases in gasoline prices, the Internal Revenue Service announced an increase in the optional standard mileage rates for the final six months of 2008. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
The rate will increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through December 31, 2008. This is an increase of eight (8) cents from the 50.5 cent rate in effect for the first six months of 2008.
If you have unreimbursed business miles, it is important to keep a log so the mileage deduction can be calculated by rate change dates for 2008.
The IRS made this special adjustment for the final months of 2008, although the IRS normally updates the mileage rates once a year in the fall for the next calendar year. Given the increase in prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile.
While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and 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.
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.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
| 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 |
Holmes & Associates Chartered would like to help you take full advantage of the new tax laws. Our goal is to become your most trusted advisor and assist you in maximizing your tax savings.
If you have questions regarding the mileage rate changes, please contact Holmes & Associates Chartered to help you with your tax questions. Contact our professionals at 785-273-9450. Visit our website at www.h-a-c.com.