IRS Increases Mileage Rate

IRS increases mileage rate by yearIRS Increases Mileage Rate
to 55.5 Cents per Mile

WASHINGTON — The Inter­nal Rev­enue Ser­vice today 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 cents a mile for all busi­ness miles dri­ven from July 1, 2011, through Dec. 31, 2011. This is an increase of 4.5 cents from the 51 cent 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 cents to 23.5 cents a mile, up from 19 cents 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 cents 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.

Reprinted from IRS Newswire

Posted in Tax Planning, Tax Resources