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 Mileage Rate Increases
 

IRS Increases Mileage Rates through Dec. 31, 2008

 

IR-2008-82, June 23, 2008

WASHINGTON — The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2008. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

The rate will increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through Dec. 31, 2008. This is an increase of eight (8) cents from the 50.5 cent rate in effect for the first six months of 2008, as set forth in Rev. Proc. 2007-70.

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 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 eight (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.

The new rates are contained in Announcement 2008-63 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.

Mileage Rate Changes

Purpose 

  Rates 1/1 through 6/30/08 

  Rates 7/1 through 12/31/08 

Business

50.5

58.5

  Medical/Moving    

19

27

Charitable

14

14

Prepping for the Tax Year End: Create More Deductions

The end of the tax year is a few short weeks away, but you still have time 
to increase your deductions and improve your bottom line when you file. 
 
Donate to charity, part one:  
A lot of people intend to do this, but the year slips away and suddenly December hits and you’re too busy to do all
the charitable giving you could. In November, go through your house and gather clothes, unwanted toys and household
items, box them up and call a local charity for a pickup, or drop them at a donation center. Be sure to get a 
donation receipt for your taxes. To figure out the proper value of these donations, check out the lists at www.salvationarmysouth.org/valueguide.htm 
 
Donate to charity, part two:
Don’t forget to get receipts when you donate money to seasonal charities, such as those providing Thanksgiving 
dinner to the homeless and Sub for Santa. And don't forget your local charities, in Lafayette, we have
Rebuilding Together Acadiana, which uses all of your donations locally! www.rebuildingtogetheracadiana.org  
 
Boost IRA deposits: 
If you make more than $94,200 this year, you’re going to hit the Social Security tax withholding limit. 
Once you do, you’ll see a 6.2% raise in your paycheck until the end of the year. Drop that extra money in 
your IRA unless you’re already depositing enough in the account to hit the limit.
 
Get into an FSA. 
November is usually the month when employees may sign up for or change elections in health coverage 
and other insurance and benefits offered through their employers. If a Flexible Spending Account (FSA) 
is offered where you work, seriously look at signing up. Depending on what your employer offers, you may 
have a medical FSA, which you can use on copays, prescriptions, vision care, orthodontics, etc.; and/or you 
can have a dependent care FSA, to pay for daycare. 
 
Both accounts use pre-tax dollars, which helps lower the amount of taxes taken out of each paycheck. 
The only caveat is that you must use the amount you put into the accounts or the money vanishes.
The spending deadline has traditionally been December 31, but this year the IRS changed the rules. 
Now you have an additional two months and two weeks beyond the end of your company’s benefit year to 
spend the money (March 15 for most employees). If you have questions about the tax deductibility of your 
donations or need help figuring out how much to put into an FSA, give us a call at (337) 501-0730.