0

IRS increases mileage rate

WASHINGTON D.C. -The Internal Revenue Service last week announced an increase in the optional standard mileage rates for the final six months of 2011.

Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business and other purposes.

The rate will increase to 55.5¢ a mile for all business miles driven from July 1, 2011, through Dec. 31, 2011. This is an increase of 4.5¢ from the 51¢ rate in effect for the first six months of 2011, as set forth in Revenue Procedure 2010-51.

In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2011. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

"This year's increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the recent increase in gas prices," said IRS Commissioner Doug Shulman. "We are taking this step so the reimbursement rate will 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 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 4.5¢ to 23.5¢ a mile, up from 19¢ for the first six months of 2011. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14¢ a mile.

The new rates are contained in Announcement 2011-40 on the optional standard mileage rates.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Comments

Use the comment form below to begin a discussion about this content.

Sign in to comment