IRS Makes Mid-Year Increase to Standard

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IRS Makes Mid-Year Increase to Standard
Mileage Rate

The Internal Revenue Service (IRS) last week announced a major
increase to the optional standard auto mileage reimbursement rate for
the last six months of 2008. The IRS raised the optional mileage
reimbursement rate eight cents to 58.5 cents per mile beginning today,
July 1, up from 50.5 cents for the first six months of 2008.

The tax agency normally makes changes to the standard auto mileage
reimbursement rate in the fall that take effect on January 1 each year.
However, on rare occasions, the agency will increase the rate during the
year to reflect significant economic changes. For example, the IRS last
increased the mileage reimbursement rate in the middle of the year from
September to December 2005 to reflect the higher gas prices associated
with Hurricane Katrina. It then lowered the rate in January 2006.

Normally, the tax agency bases the rate on its annual study of the fixed
and variable cost of operating an automobile. This latest eight-cent
increase is the direct result of increased gas prices. According to the
American Automobile Association (AAA), the national average for a
gallon of gas in the United States is about $4.08, compared to just $2.96
a gallon a year ago.