Gas Prices Prompt IRS Special Adjustments
Increases mileage rate to 55.5 cents per mile
WASHINGTON -- In recognition of recent gasoline price increases, the Internal Revenue Service (IRS) has 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 December 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 [image-nocss] Procedure 2010-51.
The IRS normally updates the mileage rates once a year in the fall for the next calendar year. But because of high fuel prices, it made this special adjustment for the final months of 2011.
"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.