The Internal Revenue Service today announced an increase in the optional standard mileage rates for the finalsix months of 2008. Taxpayers may use the optional standard rates to calculatethe 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 ineffect 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 finalmonths of 2008. The IRS normally updates the mileage rates once a year in thefall for the next calendar year.
"Rising gas prices are having a major impact on individual Americans. Given the increase in prices, theIRS is adjusting the standard mileage rates to better reflect the real cost ofoperating an automobile," said IRS Commissioner Doug Shulman. "We wantthe reimbursement rate to be fair to taxpayers."
While gasoline is a significant factor in the mileage figure, other items enter into the calculationof mileage rates, such as depreciation and insurance and other fixed andvariable costs.
The optional business standard mileage rate is used to compute the deductible costs of operating anautomobile for business use in lieu of tracking actual costs. This rate is alsoused as a benchmark by the federal government and many businesses to reimbursetheir 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. Therate for providing services for charitable organizations is set by statute, notthe IRS, and remains at 14 cents a mile.
The new rates are containedin Announcement 2008-63 onthe optional standard mileage rates.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than usingthe standard mileage rates.
MileageRate 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 |
Taxpayers can now file tax returns that include the five forms delayed by recent legislationpertaining to the Alternative Minimum Tax (AMT).
The forms are:
- Form 8863, Education Credits
- Form 5695, Residential Energy Credits
- Schedule 2, Form 1040A, Child and Dependent Care Expenses for Form 1040A Filers
- Form 8396, Mortgage Interest Credit
- Form 8859, District of Columbia First-Time Homebuyer Credit
For the vast majority of taxpayers, the filing season this year began on time. However, as many as 13.5 million taxpayers who need to file the five forms listedabove had to wait until Feb. 11 to begin filing those returns.
For moreinformation, see:
IRS news release IR-2008-19, IRS Successfully Processing Tax Forms Affected by AMT Legislation,
IRS news release IR-2007-209, Filing Season Opens on Time Except for Certain Taxpayers Potentially Affected by AMT Patch
Additional Information on the Alternative Minimum Tax
What is the AMT? The AMT came into being with the Tax Reform Act of 1969. Its purpose was to target a small number of high-income taxpayers who could claim so many deductions they owed little or no income tax. A growing number of middle-income taxpayers are discovering they are subject to the AMT.
Tax Topic 556 Alternative Minimum Tax
Form 6251 Alternative Minimum Tax
1040 Central Forms, publications, calculators and other information for the filing season