July 2008 News Update

Rising Gas Prices Spark Standard Mileage Increase

Due to rising gas prices, the IRS has increased the "standard mileage rate" for business drivers in 2008.

The standard mileage rate is an IRS-approved shortcut. It allows you to use the prescribed flat rate for the year rather than tracking all the actual business expenses of your vehicle. However, you still must keep detailed records of every business trip.

The new rate of 58.5¢ per business mile — up 8¢ per mile — applies to travel during the last half of this year. For the first half, the previous rate of 50.5¢ per mile still applies. In addition, you may deduct any business-related parking fees and tolls. The mid-year change is clearly a move by the IRS to alleviate the traveling businessperson's tax burden.

Example: You drive 2,000 business miles a month in 2008. Over the course of the year, you incur $500 in related tolls. For the first six months, you can deduct $6,060 (50.5¢ x 12,000). For the last six months, the deduction increases to $7,020 (58.5¢ x 12,000). When you add $500 in tolls, your deduction for 2008 equals $14,080 ($6,060 + $7,020 + $500).

Note that the IRS also increased its standard mileage rate for medical and job-related moving expenses from 19¢ a mile to 27¢ a mile for the last six months of this year. However, because the rate for charitable driving is set by law, it remains unchanged at 14¢ per mile.