08/11/2008

IRS Increases Business Mileage Rate

By T. Scott Gilligan, OFDA General Counsel

On an annual basis, the IRS calculates the deductible cost of operating an automobile for business, charitable, medical or moving purposes. Typically, the rate is established in the fall and applies from January 1 through December 31 of the proceeding year.

Due to the unprecedented increase in gas prices, the IRS has created an exception this year and calculated a new mid-year increase. The standard rate for business purposes of 50.5 per mile, which took effect on January 1, 2008, will be increased by eight cents to 58.5 per mile beginning July 1 and lasting through December 31, 2008. In the IRS announcement, it made note of the dramatic increases in gasoline prices to justify this special adjustment for the final six months of 2008.

This optional business standard mileage rate is used to compute the deductible cost of operating an automobile for business use in lieu of tracking actual costs. The rate is also used as a benchmark by the federal government and many businesses to reimburse employees for mileage when using personal vehicles.

The new 6-month rate for computing deductible medical or moving expenses also increases by eight cents to 27 per mile, up from 19 per mile for the first six months of 2008. The rate for providing services for charitable organizations is set by statute, not by the IRS, and remains at 14 per mile.

If any OFDA member has any questions regarding this matter, please contact Scott Gilligan at
513-871-6332.