July 2, 2008
- Gas Prices Cause Mileage Adjustment Tax Deduction
Being notified the IRS has done something is usually a scary proposition. The number on fear of most people is an audit, but the IRS actually can be helpful. When taxpayers have a universal financial problem, the agency acts fast.
The United States is home to tens of millions small businesses. One of the favorite deductions of these businesses is the business mileage deduction. You get to deduct a certain dollar figure for every business mile you drive.
The cost of fuel would seem to be a major factor considered when the IRS sets the figure and it is. There are others however. They include things such as insurance, vehicle depreciation and other issues.
The agency notifies the public of the business mileage deduction figure a few months before the beginning of the calendar year. 50.5 cents was the magic figure set for 2008.
The business mileage deduction rate is a projection. When things happen that are not projected, the IRS can change it. When Hurricane Katrina took out refineries in the gulf, for instance, the IRS cranked the deduction up.
2008 has not seen a major hurricane, but fuel prices have exploded. One needs to only be reminded that in 2000, we were paying roughly $1.50 a gallon for gasoline on average across the country.
To its credit, the IRS has voluntarily stepped forward in reaction to the fuel price spikes. It has announced that it has the discretion to change the business mileage deduction rate and has set itat 58.5 cents for the last six months of 2008.
Practically speaking, how do we come up with our total deduction? Simple. Multiply your business miles incurred in the first six months of 2008 by 50.5 cents. Use 58.5 for the rest of the year and add the to figures together.
Business mileage deductions are not the only fuel issues involved. You can deduct mileage incurred if you have to move for a job. The IRS has also increased this rate by 8 cents to 27 cents a mile.
There is one other deduction we need to mention. You can deduct certain mileage incurred while working with a charity. This is set by Congress and cannot by adjusted by the IRS, so there is no change.
Gas prices are rising to the point where people's conduct is being modified. A bigger tax deduction will not save you, but it certainly helps. Make sure to keep records of your mileage in case the IRS takes a closer look.
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