Standard Mileage Rates Increase

The Internal Revenue Service announced an increase in the standard mileage rates for the final six months of 2008. The rate increases to 58.5 cents a mile for all business miles driven from July 1, 2008, through Dec. 31, 2008. This is an increase of 8 cents from the 50.5 cent rate in effect for the first six months of 2008.

In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2008. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

"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."

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 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 mileage reimbursement rate for computing deductible medical or moving expenses for the last six months of 2008 also increased 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.

For tax purposes, you always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Mileage Rate Changes

The Mileage Log Requirement

Recordkeeping is an important element of claiming the standard mileage rate or actual costs of using a vehicle for business. A mileage log should be maintained for any vehicle used for business purposes. The log should be kept in the car for ready access. The mileage log should contain the following information for each business trip (or medical or charitable trips):

1. Date of trip
2. Business purpose for the trip
3. Location of start and finish to the trip
4. Miles driven for business purposes
5. Other expenses incurred such as parking and tolls

The vehicle log can also contain record of gasoline purchases, maintenance, oil changes, car insurance, car wash costs and auto club memberships for the year. This will allow you to determine the actual cost of operating your vehicle. Claiming actual costs is an alternative to the standard mileage reimbursement.