IRS Increases Business Mileage Deductible From 50.5 To 58.5 Cents

To help ease the pain of higher gas costs, starting July 1st the IRS will increase the allowable business deductible for business vehicles from 50.5 to 58.5 cents per mile. The IRS is also going to raise the rate for calculating computing deductible medical or moving expenses from 19 cents to 27 cents a mile, also starting July 1st. The rate for charity services, requiring an act of law to change it, remains at 14 cents per mile. If you’ve been meaning to claim business mileage deductions, July 1st will be a great time to begin. Here’s info on how to get started.

IRS Increases Mileage Rates through Dec. 31, 2008 [Press Release]

(Photo: beebo wallace)

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  1. katinka says:

    Yay! I finally found something to complain about right away! This is great for people with cars, but what they should really pass is a deduction for bikes, instead of rewarding people for driving their cars. There was a bicycle commuter act in the news a couple years ago, but as far as I can tell it didn’t go anywhere. Grr.

  2. Cynicor says:

    Yeah, great idea. So when I go from Long Island to visit a client in Boston, or when I drive to the airport for a week-long trip to California, I can just bike with my luggage.

  3. wickedpixel says:

    @katinka: It’s not rewarding people for driving – it’s writing off a business expense. Ordinary commuting is not considered a business expense in most cases. If you use your bicycle for business, feel free to write off that handlebar basket and bell.

  4. Bladefist says:

    @katinka: I must have missed that day in class we went over the government rewarded/punished people for driving their car or riding a bike.

    wickedpixel is right.

  5. Televiper says:

    Sounds like somebody needs to start pushing for a private members bill to increase the charitable deduction as well.

  6. Noiddog says:

    Or we could always revert to something like this instead.

    [img129.imageshack.us]

  7. howie_in_az says:

    If only this would work for commuting full-time employees instead of commuting contractors…

  8. I’ll benefit from this increase (because my employer reimburses mileage at the exactly the IRS rate), but it’s always struck me as symptomatic of “tax cuts fix everything” cluelessness.

    I mean, the price of gas is skyrocketing, and all the feds can do is increase a tax break that (as howie_in_az points out) that doesn’t apply to most people? I don’t need the help as much as the minimum-wagers do, but they get nothing, except maybe a lecture about carpooling and mass transit. It offends my sense of social justice.

  9. katinka says:

    I can understand people who have to travel a long way getting this discount, but I really don’t see why you would not also give it bikes. I have run my own busines for the last 5 years, and I can’t take any tax benefits from choosing to get around by bike, but if I were to buy a car, I could? I mean, that is really the government endorsing cars. Why not give this write off to taking mass transit to the airport, which I am pretty you can do in Boston. Blue Line.

  10. christoj879 says:

    Suh-fucking-weet. I drive about 10-15,000 miles for business every year, yet my cost per mile of driving is around $0.20. :D

  11. katinka says:

    Ok, that was a little bit cranky of me. I do think that the govt should try a bit harder to help out people with incentives to bike commute. I don’t have a car, why can’t I get a some bike parking or lanes instead of giving car owners a tax rebate?

  12. katinka says:

    I would take a tax rebate on the food I eat to pedal around.

  13. chrisgeleven says:

    Dammit, I submitted my expense form last week with over 400 miles on it.

  14. Bladefist says:

    @katinka: It’s not an incentive!
    By driving, it cost them money for gas. When you ride your bike it doesn’t cost you anything, so you dont get anything back. People who drive also eat.

    You’re embarrassing yourself.

  15. katinka says:

    If this is the way I embarrass myself today, I’m doing pretty good.

    I am actually not against this deduction for cars.

    I am just saying fuel is fuel.

    But yes, this is great news for cars.

  16. valthun says:

    most commuting incentives are paid out by the businesses. Those are generally based on number of employees = x and number of available parking spots = y. Where y is less than x they offer incentives so that said employees don’t have fist fights over a parking space. Depending on the state, city, county, whatever, there may be incentives to businesses to provide carpooling only spots, which tend to have a spot closer to the building entrance.

    This is also just about a tax deduction on fuel and mileage on the vehicle for travel. However there are also rules that dictate payment for travel that are outside of the “normal business hours”.

    As for public transportation, that is provided by the local government, and the incentive is that if you purchase their monthly pass you get a discount compared to paying each way daily individually and full access to anywhere they go. As long as where you need to go is where they are going and you are willing to return when the last bus runs.

    As for bikes, well, maybe there should be some kind of incentive. But many cycle commuters also use public transportation to cover the large gaps of distance, so they get that benefit of public transportation too if they pay the monthly fee. But I wouldn’t expect a write-off on the bike unless your job is riding a bike daily, like a local courier or professional racer. A commuter bike wouldn’t get a write-off on the taxes.

  17. MakGeek says:

    “If you’ve been meaning to claim business mileage deductions, July 1st will be a great time to begin.”

    Doesn’t work like that, you get reimbursed at the rate in place at time mileage incurred.

  18. zolielo says:

    Sweet. I just got used to getting 50.5 from my agency – 58.5 will be great. Driving an agency car is recommended but with the current shortage having to use my private is sometimes a must. Currently with normal maintenance (not including performance tuning), insurance, and gasoline the out of pocket cost is 43.9 cents per mile. For the risk of using my own car the 6.6 excess cents per mile.

  19. zolielo says:

    … has been a bit too close for my liking.

  20. olechief says:

    This seems to be a slower reaction than that increase in the allowance prompted by Katrina’s damage to Louisiana refinery capacity. Better late than never.

    Can someone explain why it is (or will be) an expense of .585/mi for business use of a vehicle, while the same vehicle used for medical/moving expenses will be.27/mi?

    Remember the simple explanation of “one man, one vote” was — “one bloody man, one bloody vote”. How about
    “one bloody mile, one bloody allowance.”

  21. ffmariners says:

    @Bladefist: When you ride your bike you typically eat more. Your body needs to get the energy from somewhere. So unless you are planning on losing a lot of weight….

  22. mrsunshine says:

    This is my first year deducting car expenses and I have to admit I’m a bit of a novice so how does this work. Does the government actually give you 58.5 cents for every mile you drive? If I make 100k per year and drive 10k how much money would I get back? $5850?

  23. humphrmi says:

    I pay for my monthly commuter train ticket with pre-tax income, thus getting a small tax break for taking public transit. Then when I have to drive for my company, they pay me the IRS rate above. I don’t see that one is related to the other, nor do I see that either (conservation or driving) is getting “punished” or “rewarded” at the expense of the other.

  24. karmaghost says:

    I was paid per mile by my company last summer for driving 2 hours a day for my summer position. It was $.485 this time last year and I’m sure the $.10 increase will be welcome.

  25. drjayphd says:

    @Bladefist: (ding!)

    I get mileage money at work, but that’s because I’m expected to drive to events that aren’t within walking (or biking) distance of the newsroom as part of my job. That’s what this is for, not people who just go to the office, etc. and back. I suppose if I biked to games, I could write something off, but seeing as my job specifically requires a car, pretty sure it wouldn’t come up. ;)

    Of course, they don’t pay us the federal rate, just something vaguely indexed to gas prices. Last time they recalculated it (back in March) the $.38/mile rate was supposed to cover gas and car maintenance. Oops.

  26. Kevino says:

    @katinka:

    Because this is America, we start wars over oil. Do you think we would subsidize your gas-conserving vehicle here? Hell no.

    /sarcasm

  27. ab3i says:

    For all those criticizing the mileage reimbursement increase, have you considered that some people do not have the option of taking public transport and require to drive. When I am on a local consulting project (not flying out every week), I am expected to drive to client sites, but I am only reimbursed the distance between my local office and the client site (versus the company paying for everything when I am traveling to a client site). This increase is very welcome.

  28. youbastid says:

    @ab3i: Pretty sure you’re not eligible for that credit – as it’s the distance you would normally be traveling to get to the office. That’s the reason your company doesn’t reimburse you for those miles – because THEY can’t write it off either.

  29. K-Bo says:

    @katinka: This is not generaly a credit given for every day commutes. This is credit for when you use your own personal vehicle for work purposes. This could include business trips, taking clients out on the town to be wined and dined, ect. As other have said, I doubt many of these things are done by bike.

  30. katinka says:

    My business involves visiting clients in short hops, so I usually go only 15 to 20 miles a day, but in 2 or 3 mile trips. My accountant has told me that if I did have a car, I could deduct gas, as do other people have jobs or busineses like this. While in my mind this is the government subsidizing cars, I realize that people feel they have to use their cars to get to different places, and this is a good deal for them.

    Regardless of the tax benefits, getting a car would be a big lose for my business, so I will just continue biking around.

  31. mike says:

    If you volunteer on a regular basis (e.g. volunteer at a church every week), these savings add up. Be sure to record your miles though.

    One year, since I was volunteering as a counselor at my church almost everyday, I reduced my taxes by almost $200

  32. stinerman says:

    @K-Bo:

    That would rock incredibly hard if people took out their business clients to dinner … by having them get on a tandem bicycle.

  33. @Bladefist: Also note that this is a flat rate. It’s the same whether you drive a Prius or a Hummer. So there is, in fact, an incentive towards energy efficiency. So there.

  34. Bladefist says:

    @Steaming Pile: lol well you have a point there. But I think overall, the government is not rewarding anyone anything. It’s really just trying to lift some costs off you.

  35. Apeweek says:

    Okay, here’s something to consider. I drive an electric car that I bought used from eBay for just $2000.

    Examples of used electric cars can be seen here: [www.austinev.org]

    My electricity cost is just 1 to 2 cents/mile. The cost of replacing my batteries every 5 years or so comes to another 4-5 cents per mile. Electric vehicles have almost no other maintenance costs (no filters, fluids, tune-ups etc. In fact, electric motors have just one moving part, and can last decades with no service.)

    I’m also self-employed, and I deduct my mileage. So I have a car that costs 5 to 7 cents per mile, and the IRS lets me deduct 58.8 cents/mile for driving it.

    The government PAYS ME to drive an electric car.

  36. Elcheecho says:

    @Apeweek: I’m thinking you’re coming out even.. Spread $2000 over that 5 years along with any insurance, plus the fact that the 58.8 cents is a deduction and not a credit. I’m thinking the difference, if any, is less than 5 cents a mile. Congrats on your electric car though.

  37. Apeweek says:

    @elcheecho: The $2000 doesn’t have to be spread over 5 years; EVs have very high resale values.

    The “Electra Van” (the vehicle I drive) sold new for $8000 in 1981; in good shape it still gets $5000 today. The $2000 I spent to buy it, and the $2000 I spent to fix it up will all be returned to me when I sell it.

    And the insurance rate I pay is actually very low – but you are right, I should have included that as well – it comes to about 2 – 3 cents/mile.

  38. rhombopteryx says:

    @Bladefist:

    Economics fail… Mileage deductions ARE a form of “subsidy”/ “incentive”/ “deduction”/”break”/”sop to the gass guzzing masses” even if you personally don’t want to label it that way. Tax deductions are just another form of subsidy. While you DO have to buy the gas first, the govt. cuts you some $$ slack for doing so – so you ARE being rewarded. Think of it like a mail-in rebate after purchase…

  39. angryhippo says:

    I would like to point out that as someone who has to drive to various locations during my day as part of my job this comes nowhere near making up for the increase in gas over the past few years. I think the allowance has increased from $.45 to now $.58 in the past three or four years? And gas has gone up over 100% in the same time? It is suppose to help with gas AND wear and tear on the vehicle. Now it’s pretty much just gas.

    BTW, I know that I should feel lucky to get anything and I’m not owed anything, blah blah blah. Just saying…

  40. RayDelMundo says:

    @katinka:
    The government is not subsidizing my car. They are allowing me to deduct the actual, tangible expenses that it takes to travel.

    When you can quantify the fuel it takes for you to pedal around, maybe you’ve got an argument.
    Until then, take your bike shoes out of your mouth and smugly ride your bike.

    @angryhippo:
    Wear & tear don’t go up that much every year.
    If you can go as little as 250 miles on a tank of gas, even at 50 & 1/2 cents/mile, your deduction is over $125. If you can’t fill up and maintain your car on that, you need another car.

  41. katinka says:

    I actually don’t have bike shoes, since I have to hop off my bike and go right to work, and I really don’t care for pedals that you clip onto.

    I think it would be pretty simple to come up with a standard formula for calories burned per mile on bike and give so many cents credit on food; clearly that wouldn’t be accurate for everyone, but as pointed out here, different cars get different mileage.

    I ride my bike to work, because it makes sense financially for my businesses. It just seems to me that if you need to collect 58 cents a mile to conduct your business and be profitable from the government, your business model might need some fine-tuning.

  42. AD8BC says:

    This really helps me with my wife’s job. She drives all over creation (well, the DFW area, anyway) doing home healthcare. Her employer just upped her mileage reimbursement from 30 cents (and we deducted the difference) to the full 50.5 cents… hell, she puts about 3000 miles on her car in one month. It’s not a “government reward” for driving a car. Sometimes, cars are necessary. Cars are not evil!

  43. handtoppcs says:

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