June 25, 2008
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
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
"Rising gas prices are having a major impact on individual
Americans," said IRS Commissioner Doug Shulman (pictured) in a
statement. "Given the increase in prices, the IRS is adjusting the
standard mileage rates to better reflect the real cost of operating
an automobile. We want the reimbursement rate to be fair to
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
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.