June 23 (Bloomberg) -- Higher fuel prices have prompted the Internal Revenue Service to raise the reimbursement rate for mileage incurred in business use to 55.5 cents, the agency announced.
The IRS said today the change will take effect July 1. The current reimbursement rate for vehicle use is 51 cents. The reimbursement rate for vehicle mileage incurred as a medical or moving expense will rise to 23.5 cents, up from 19 cents. The mileage rate for vehicles used as a charitable contribution is fixed by law and remains at 14 cents a mile.
The business mileage rate is used to calculate the tax-deductible cost of operating a vehicle for business use rather than tracking actual expenses. It’s used as a benchmark by the federal government and many businesses in setting reimbursement rates for employees’ business mileage.
“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 increases in gas prices,” IRS Commissioner Douglas Shulman said in a statement today. “We are taking this step so the reimbursement rate will be fair to taxpayers.”
The national average gas price is $3.61 a gallon today, according to AAA. That’s down from the year-to-date high of $3.98 a gallon on May 5, AAA spokesman Troy Green said.
The new reimbursement rates will be in effect until the end of the year, when IRS will recalibrate them.
The IRS also made a mid-year adjustment of the reimbursement rate in 2008, when it raised the rate 16 percent to 58.5 cents. That year, gas prices peaked at $4.11 on July 17, the highest average price on record, according to AAA.
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