The Internal Revenue Service has announced an increase in the standard mileage rates for the final six months of 2011.
The rate will increase to 55.5 cents per mile for all business miles driven from July 1, 2011, through Dec. 31, 2011. This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011.
Typically, the IRS updates the mileage rates once a year in the fall for the next calendar year. However, the IRS made a special adjustment for the final months of 2011. While gasoline is a significant factor in the adjusted mileage figure, other items enter into the calculation of mileage rates, such as depreciation, insurance, and other fixed and variable costs.
Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business and other purposes in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage. Of course, taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
The new six-month rate for computing deductible medical or moving expenses will also increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.
While the increased rate may impact the budget of a local church, accountable reimbursement plans should be adjusted to reflect the new mileage rate as of July 1, 2011.