IRS Standard Mileage Rate Change

These days, everyone is reacting to rising gas prices, including the Internal Revenue Service. Through Announcement 2008-63, the IRS is raising the optional standard mileage rate for operating a vehicle for business purposes from 50.5 cents to 58.5 cents per mile, effective July 1, 2008. 

The new rate applies to applies to qualifying expenses that are both incurred and reimbursed on or after July 1.

While there are generally no Pennsylvania laws requiring employers to use the IRS’ rate, there may be some tax advantage for doing so. The IRS will deem employers who make qualifying reimbursements up to 58.5 cents per mile as meeting their accounting requirements, thus no income reporting or withholding is required for those reimbursements. However, employers need to make sure that their employees have provided adequate proof that the mileage was strictly for business use.

Qualifying employees who are not reimbursed for their business mileage will be able to deduct 58.5 cents per mile on their individual tax returns. However, it is important that the qualifying miles incurred between January 1, 2008 and June 30, 2008 are recorded separately from the miles accrued on and after July 1 because the old rate continues to apply to them

More information on this topic is available in section 5 of IRS Publication 15, although the Publication does not currently take into account the new rate.