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Higher Gas Prices Prompt IRS Mileage Rate Increases
June 2008
Citing the financial strain that higher fuel prices have created for businesses and individuals, the IRS recently enacted mid-year mileage rate adjustments effective for July 1, 2008 through December 31, 2008.
The business standard mileage reimbursement rate increased from 50.5¢ per mile to 58.5¢. The increase of eight cents per mile also applies to the rate for moving and medical expenses, which increased to 27¢ from 19¢. The charitable deduction rate remains the same at 14¢.
Please note that even though the increased mileage rate only applies to the final six months of 2008, taxpayers cannot elect to deduct actual expenses for the first half of the year, and then choose the standard rate for the second half. The same method must be used for the entire year.
Moreover, taxpayers cannot deduct the standard mileage rate in the same year that depreciation of a vehicle’s basis is taken on vehicles purchased and placed into service. Due to the Economic Stimulus Act of 2008, this is an important distinction because of the 50% bonus depreciation allowance (and potential Section 179 deduction) for certain vehicles placed into service in 2008.
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