IRS raises mileage tax deduction 16%; now it's 58.5 cents

Great news for home-based business owners! I found this article on ChicagoTribune.com.

By Ryan J. Donmoyer |Bloomberg News

2:20 PM CDT, June 23, 2008

The U.S. Internal Revenue Service increased the mileage deduction for the rest of the year by 16 percent to 58.5 cents a mile because of the rising price of gasoline.

"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."

The national unleaded average gasoline price has been above $4 for most of June, according to AAA. Gasoline is more expensive than last year by $1.09 per gallon.

The mid-year IRS adjustment allows Americans to use the higher deduction amount from July 1-Dec. 31 instead of cataloguing actual costs of operating a vehicle for qualified purposes.

The mileage deduction for the first half of the year was 50.5 cents per mile. The 58.5 cents per mile deduction applies to business use of a personal vehicle. Drivers who use their vehicles for medical reasons or to move can deduct 27 cents per mile, up from 19 cents in the first half of the year. The use of a vehicle for charitable purposes is set by law at 14 cents and wasn't increased.

Employees who drive their own cars for work-related or charitable purposes can choose to deduct or seek reimbursement from their employer or the charity they serve for actual costs incurred, requiring extensive record-keeping. They also can claim the mileage rate.

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