Vernoia, Enterline + Brewer, CPA LLC

For the third time in six years, the IRS has announced a mid-year increase in the business standard mileage rate to reflect higher gasoline prices. The business mileage rate increases by 4.5 cents, rising from 51 cents-per-mile to 55.5 cents-per-mile for all business miles driven during the second half of 2011. The medical/moving mileage rate also increases by 4.5 cents-per-mile for the final six months of 2011 but the charitable mileage rate, set by Congress, remains unchanged.

Mileage rates

Taxpayers that use the standard mileage rate method calculate the fixed and operating costs of their automobiles, light trucks or vans by multiplying the number of business miles traveled during the year by the business standard mileage rate. Using the standard mileage rate generally takes the place of deducting many of the operating costs of a vehicle. With certain exceptions, the standard mileage rate is generally available to all taxpayers. One important exception applies to five or more vehicles used simultaneously, as in fleet-type operations.

Rising gas prices

The IRS traditionally sets the mileage rate for the current year at the end of the preceding year.  In December 2010, the IRS announced that the business standard mileage rate would be 51 cents-per-mile for calendar year 2011 and the medical/moving standard mileage rate would be 19 cents-per-mile for 2011. The charitable mileage rate, at 14 cents-per-mile would remain unchanged for 2011.

In May 2011, a bipartisan group of lawmakers encouraged the IRS to raise the 2011 mileage rates to reflect higher gasoline prices.  The IRS previously raised the mileage rates in mid-year 2008 and in mid-year 2005 because of spikes in gasoline prices. Gasoline prices are one factor that the IRS takes into account in determining the rates.

Mid-year adjustment

“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 gasoline prices,” IRS Commissioner Douglas Shulman said in announcing the mid-year rate change.

Effective July 1, 2011, the business standard mileage rate increases from 51 cents-per-mile to 55.5 cents-per-mile for business miles driven on or after July 1, 2011 and on or before December 31, 2011.  The medical/moving standard mileage rate increases from 19 cents-per-mile to 23.5 cents-per-mile for the same period. However, the charitable standard mileage rate is unchanged at 14 cents-per-mile for the final six months of 2011.

If you have any questions about the mid-year mileage rate adjustment, how to use the standard mileage rates or the actual expense method, please contact our office.

IR-2011-69, Ann. 2011-40

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