After first saying that a midyear change in the optional standard mileage deduction rates wasn't likely, the IRS relented.
Today the agency announced that starting July 1, the rate for deductible business travel will increase to 55.5 cents a mile. That's a bump up of 4.5 cents from the 51 cent rate that's in effect for another week.
Also going up by 4.5 cents between July 1 and Dec. 31 of this year will be the mileage deduction for medical or moving expenses. Qualifying driving in these areas will be 23.5 cents a mile for the last half of the year, compared to 19 cents a mile for the first six months of 2011.
|Miles driven between
|Jan. 1 and June 30||51
|July 1 and Dec. 31||55.5||23.5||23.5||14|
As usual, the rate for providing services for charitable organizations remains at 14 cents a mile. That deduction level is set by statute, and can be changed only by an act of Congress.
"Significant" factors prompt rate hike: The mileage rate changes typically occur in the fall of each year unless there's something significant to prompt IRS action.
"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 in noting why his office changed its mind.
In addition to the cost of gasoline, the IRS mileage rate is calculated using vehicle depreciation and insurance and other fixed and variable automotive costs.
The IRS instituted a similar midyear mileage deduction rate change in 2008 when gas also flirted with $4 a gallon.
This change could be a real boon for drivers. The prez also announced today that he's tapping the strategic oil reserve. That should help keep gas rates down just as the IRS is hiking its deduction rates. Do these guys ever talk? Oh well, we tax-deducting drivers will just enjoy their lack of communication.
As you did three years ago, be sure to keep good track of your mileage for the different rate periods. This deduction will be one more thing that IRS will be keeping a close eye on to make sure that folks don't calculate all their 2011 deductible miles at the half-year-only higher rate.
And remember, you don't have to use these rates. You can always compute the actual costs of using your vehicle and claim a deduction based on those figures if they provide a better tax result.
- IRS not likely to bump up optional standard mileage
deduction rates ... yet
- Representatives ask IRS for mid-year mileage rate hikes
- Gas prices are rising. Will the IRS hike its standard mileage rate
to match them?
- Per-mile tax taken for a brief test drive
- Mileage tax deduction rates for tax years 2010 and 2011
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