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IRS Boosts Gas Mileage Rates, Charitable Deduction Unchanged

(June 30, 2008) Due to rising gasoline prices, the Internal Revenue Service (IRS) has increased the optional standard mileage rates that determine the deductable cost of using an automobile for business, medical and moving purposes. However, the mileage rate for automobile use for charitable purposes stayed the same.

The mileage rates for business automobile use increased to 58.5 cents per mile from 50.5 cents and from 19 to 27 cents a mile for medical/moving automobile use. The new rates will be in effect from July 1, 2008 through Dec. 31, 2008.

Normally, the IRS adjusts mileage rates yearly, but the agency said in a statement that it increased the rates mid-year because “Rising gas prices are having a major impact on individual Americans,” according IRS Commissioner Doug Shulman.

The IRS noted that the rate for providing services for charitable organizations is set by Congress, not the IRS, and so remains at 14 cents a mile. According to the IRS record of standard mileage rates since 1998, business and medical/moving rates have increased steadily over the ten year period. These rates are set by an independent contractor for the IRS, not by statute.

The standard mileage rate for charitable purposes, on the other hand, has remained at 14 cents a mile since 1998, with the exception of fall 2005 through the end of 2006, when Congress temporarily increased the rates for charities providing disaster relief following Hurricane Katrina.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates, notes the IRS. Still, many businesses use the optional standard mileage rate as their benchmark for reimbursing employees for mileage.

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