IRS Standard Mileage Rates

Now that the tumultuous gas price fluctuations of 2008 are but a distant memory, the Internal Revenue Service has issued the optional standard mileage rates for this year. Instead of complicating things by having two separate rates for the first and the second six months of 2008, they have gone back to a single rate for the whole of 2009. For this reason alone, taxpayers will find it easier to use the optional standard rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

The new rates for business, medical and moving purposes are slightly lower than rates for the second half of 2008 that were raised by a special adjustment mid-year in response to the spike in gas prices. The rate for charitable purposes is set and is unchanged from 2008.

The business mileage rate was 50.5 cents in the first half of 2008 and 58.5 cents in the second half. The medical and moving rate was 19 cents in the first half and 27 cents in the second half.

The mileage rates for 2009 reflect generally higher transportation costs compared to a year ago, but the rates also factor in the recent reversal of rising gasoline prices. While gasoline is a significant factor in the mileage rate, other fixed and variable costs, such as depreciation, enter into the calculation.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.

The new rates are contained in Revenue Procedure 2008-72 which contains additional information on these standard mileage rates.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Mileage Rate Changes

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