IRS raising mileage-deduction rates

WASHINGTON - The Internal Revenue Service, citing the drain that high gasoline prices are imposing on people's finances, said yesterday that it was raising the automobile mileage rate that businesses and others can claim.

The tax agency said the optional standard rate to calculate deductible operating costs for business vehicles will rise from 50.5 cents a mile to 58.5 cents for the final six months of 2008.

That rate also applies to businesses and others entitled to depreciation allowances that operate automobiles for charitable, medical or moving purposes.

"Rising gas prices are having a major impact on individual Americans," said IRS Commissioner Doug Shulman. "Given the increase in prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile."

Shulman, in an interview, said the agency had been keeping an eye on gasoline prices since 2005, when prices spiked after Hurricane Katrina. He said officials wanted to get the guidance out on the new rate so businesses can do midyear adjustments July 1.

The IRS said it was also changing the rate for computing deductible medical or moving expenses for vehicles from 19 cents to 27 cents a mile for the final six months of the year. That applies to individuals not entitled to depreciation allowances.

Congress must enact legislation to change the rate for providing services for charitable organizations, so that will stay at 14 cents a mile.

The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

"This is welcome news for a lot of folks out there. There's no question that the cost of operating a vehicle has risen exponentially due to the dramatic increase in gas prices," said Sen. Norm Coleman (R., Minn.).

Coleman sent a letter to Shulman last week and called on him to urge that the rate be increased to better reflect rising transportation costs.