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Date: June 25, 2008
Subject: G&G Tax T.O.W. - "IRS Increases Mileage Rates"

This is
G&G Associates
Tax & Financial Consulting Services
e-Newsletter


IRS Increases Mileage Rates through Dec. 31, 2008

WASHINGTON — The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2008. Taxpayers may use the optional standard rates to calculate the 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 in effect for the first six months of 2008, as set forth in Rev. Proc. 2007-70. So, if you had a business and you drove 10,000 business miles from July - Dec this would be a $5800 tax deduction. Do the math...this could be a big deduction, BUT only if you had a business.

In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2008. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

"Rising gas prices are having a major impact on individual Americans. Given the increase in prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile," said IRS Commissioner Doug Shulman. "We want the reimbursement rate to 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 eight (8) cents to 27 cents a mile, up from 19 cents for the first six months of 2008. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

The new rates are contained in Announcement 2008-63 on the optional standard mileage rates.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Mileage Rate 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

Caution, in order to take these deductions, proper record-keeping is critical. Please visit G&G Associates website and click on the "audio" class "Record-keeping" & "Vehicle Expenses" to make sure you are doing it correctly.


Thanks

Gary Gray
Tax & Financial Consultant, RFC
G&G Associates
877-817-6031 toll-free
866-361-3872 toll free fax
www.gngassociates.net

"The great end in life is not knowledge but action."
Thomas Henry Huxley



 

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