IRS Increases Mileage Rate

September 12, 2005 (PLANSPONSOR.com) - In response to the spike in gas prices, the Internal Revenue Service has increased the optional standard mileage rates to 48.5 cents per mile for business miles traveled between September 1 and December 31, 2005.

In an IRS news release, IRS Commissioner Mark Everson said, “With many predicting a decline in gas prices over coming months, we will hold off on setting the 2006 rate until closer to January.”   The IRS usually sets the rate in the fall for the coming year.

Gas prices as well as new vehicle prices and insurance rates are used to determine the mileage rate, the release points out.   The rate is used to calculate the deductible cost of operating a vehicle for business use.   Many companies also use the rate to reimburse employees for travel expenses.

In addition, Rev. Ruling IR-2005-99 set the new four-month rate for computing deductible medical or moving expenses to 22 cents a mile.  According to the news release, the rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

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