New Mileage Rate for 2009 Announced

The IRS has issued Revenue Procedure 2008-72 announcing the 2009 standard mileage rates. The optional standard mileage rate for business miles will be 55 cents per mile beginning January 1, 2009. The depreciation component of the standard mileage rate is 21 cents per mile.

Track Your Mileage in 2009

Now is the time to plan an important part of your tax strategy for 2009. Tracking mileage for business purposes, charitable contributions and medical visits can save you hundreds of dollars in taxes.

It amazes me when I speak to small business owners who do not track their mileage. Your company does not have to be a full-time venture in order to deduct the vehicle expenses associated with with your business activities. Trips to the post office, the office supply store and any number of business actions requiring the use of your automobile are legal deductions.

Our sponsor, MileageBooks.com, makes an excellent auto mileage log for tracking your trips. You'll need documentation so make sure to use this product or some sort of form that shows the date, destination and purpose of your trips along with beginning and ending odometer readings.

Prediction on Mileage Rates

With oil prices dropping below $90 per barrel the smart money is being bet on no action being taken to increase the standard mileage rate for this year.

Congress has forgotten the issue and the relief at the gas pump has reduced consumer anger over fuel prices. I guess that our elected officials only react to "emergencies" - not good policy initiatives. I also suppose that Americans have too short of an attention span to stay on an issue, especially when new and bigger problems arise.

We will anxiously wait to see what the rate is set at for 2009.

Mileage Rate Still Unchanged

Many of you have written to let me know that you have contacted your senators and or house representative. Thus far none of the legislation introduced has gotten out of committee.

Keep up the good work. As the election nears those running for election will be tuned into the demands of their constituents. In the meantime, don't let the recent relief at the pump curb your enthusiasm for the standard mileage rate increase as it is proposed in several house and senate bills.

House Bills Propose Increased Mileage Rates

A plethora of bills have been introduced in the U.S. House of Representatives designed to use the standard mileage deductions to offset the high cost of fuel. While the I.R.S. has increased the rate by administrative action beginning on July 1, the increase to 58.5 cents does not reflect the actual cost of increased gasoline prices on businesses.

We continue to urge passage of U.S. Senate Bill s.3032 which would raise the rate to 70 cents per mile. Following are some of the bills being considered in the House:

H.R.6165, introduced by Rep. Edward Whitfield, would allow commuters to deduct mileage based on the current standard mileage rate. The idea is to give all Americans a tax break due to rising fuel costs.

Meanwhile, H.R.2020, Introduced by Rep. Todd Platts, would permanently raise the rate for mileage incurred for charity purposes. The current rate of 14 cents per mile has not changed for several years.

Also in the works is H.R.6263, introduced by Rep. John Lewis, which comprehensively looks at all of the mileage rates that have been traditionally deducted. This bill seems to more closely mirror the Senate version which we support.

Contact your Senators and Representative to urge passage of a significantly increased standard mileage rate.

New 2008 Standard Mileage Rate

This was announced by the IRS today:

This announcement informs taxpayers that the Internal Revenue Service is modifying Rev. Proc. 2007-70, 2007-50 I.R.B. 1162, by revising the optional standard mileage rates for computing the deductible costs of operating an automobile for business, medical, or moving expense purposes and for determining the reimbursed amount of these expenses that is deemed substantiated. This modification results from recent increases in the price of fuel.

The revised standard mileage rates are:
(1) Business 58.5 cents per mile
(2) Medical and moving 27 cents per mile

The mileage rate that applies to the deduction for charitable contributions is fixed under § 170(i) of the Internal Revenue Code at 14 cents per mile. The revised standard mileage rates set forth in this announcement apply to deductible transportation expenses paid or incurred for business, medical, or moving expense purposes on or after July 1, 2008, and to mileage allowances that are paid both (1) to an employee on or after July 1, 2008, and (2) with respect to transportation expenses paid or incurred by the employee on or after July 1, 2008.

The standard mileage rates set forth in Rev. Proc. 2007-70 continue to apply to deductible transportation expenses paid or incurred for business, medical, or moving expense purposes before July 1, 2008, and to mileage allowances paid (1) to an employee before July 1, 2008, or (2) with respect to transportation expenses paid or incurred by the employee before July 1, 2008. All other provisions of Rev. Proc. 2007-70 remain in effect.

Though any relief is welcome, TaxMiles does not believe that this change is reflective of the actual costs and that Congress needs to continue to look at raising rates further. Not only is the rate not high enough, it is not retroactive as would be Senate Bill s.3032.

We still urge you to contact your U.S. Senator to have the rate raised further.

Senate Bill Proposes Increase in Standard Mileage Rate

Sen. Charles Schumer (D, NY) is once again coming to the aid of small business owners by introducing Senate Bill s.3032 which would increase the standard mileage rate for all of 2008 to 70 cents per mile.

The bill has a proposed act title of "Reimbursing Our American Drivers (ROAD) Act of 2008" and would also raise the rate for charitable miles from 14 to 40 cents per mile.

Taxmiles urges all readers of this blog to contact their U.S. senators to urge passage of this bill which will have a strong benefit to the economy and help keep prices for all goods and services lower. You can find the senator from your state at this web site.

Change never happens in Washington, D.C. unless citizens demand it.

Saving Money on Gasoline

One way to reduce the cost of operating a business vehicle or to decrease fuel expenditures for a fleet is to shop for the best available prices. Gasoline prices at filling stations can vary widely so it pays to know which operators are offering the best deal.

There are web sites that will give you the lastest retail prices at filling stations near your business or home. At GasBuddy.com you can search prices by state, city and even zip code. In my zip code area, for example, the price of gasoline varied from $3.89 to $3.64 per gallon of regular unleaded. Believe it or not, COSCO was not the cheapest price listed.

Of course, it is important to be sure of the quality of gasoline. Some off brands may not provide sufficient octane or may not offer helpful additives. But researching prices can reduce your operating expenses and the internet is an easy way to find the best deals.

Speaking of COSCO, your local branch store may offer one of the lowest available prices. In our case, we use our COSCO issued AMEX card to get an additional 5% discount. At COSCO's current price and including the additional discount, I just paid $3.47 per gallon. With most local filling stations charging about $3.75, and our monthly consumption at 140 gallons, we are saving nearly $40 per month on fuel.

Standard Mileage Deduction Advantages

The age of a car may impact whether or not you utilize the Standard Mileage Deduction or some other method for expensing your business vehicle usage. An older car may realize greater tax benefit from the Standard Mileage Deduction if one or more of the following apply:

1. Its value has diminished and depreciation would be a minimal part of the expenses to be deducted,
2. The vehicle is paid for and no interest is being applied against it that could be deducted,
3. Cost of repairs and maintenance is minimal.

To determine if the Standard Mileage Rate is more beneficial, simply multiply the number of business miles by the current IRS allowance and compare that amount to the cost of operation multiplied by the percent of business usage.

There is one major factor to consider - you may not switch back and forth between expensing methods. Once you select the expensing method, you must continue to determine your deductions using that formula until disposition of the vehicle.

For more information on requisites and exceptions visit the IRS explanation page .

Tax Credits for Hybrid Vehicles

If you or your business is looking for a tax break, then purchasing a hybrid vehicle could provide a credit on your 2008 IRS bill.

You can find information on the available tax credits for different models available from the manufacturers that currently sell hybrid vehicles at the Government Fuel Mileage Site. However, you need to be sure to check on the current sales figures for specific models because the tax credits begin to decrease after 60,000 units have been sold by the manufacturer. The tax credits actually drop to nothing over the next several months after that 60,000 benchmark is reached.

Once the tax credit is decreased or eliminated you will need to evaluate whether the higher purchase price and maintenance costs will save you money as opposed to a conventional vehicle. For example, our analysis of the total cost of ownership for a Toyota Prius versus a similarly equipped Ford Focus found that the Focus was less expensive to own over five years (excluding a tax credit).

This article gives an excellent review of the parameters to be considered when comparing the cost of a hybrid versus an all gasoline powered vehicle: quamut.com .

Also, be sure that if you lease a hybrid, you receive a discount commensurate with the available tax credit. The law is written so that the leasing company keeps the tax credit.

Again, that primary link is: Government Fuel Mileage Site.

Fuel Prices

If the price of oil and gasoline continue to rise, we would expect the standard mileage rate to be adjusted upward sometime this year. It would hold that since businesses utilizing the expense deduction method would realize a tax savings proportional to their operational costs, the IRS should extend that same consideration to those that employ the standard mileage rate.

This is not a novel idea. The same was done in 2005 and we urge that Congress immediately look into this issue. The self-employed and other small business owners are being hit much harder by this tax disparity since most of them use the standard mileage deduction.

It is estimated that each one dollar rise in the cost of a barrell of oil results in a 2.4 cent increase in the price of a gallon of gasoline. It is no wonder then that fuel has become so much more expensive. Oil prices, which are directly affected by demand and speculation combined with other government energy policies and world issues, do not look to decrease soon.

For more information on this subject we recommend the following news articles and web sites:


1. http://www.wtrg.com/ Analysis, planning, forecast and data services for energy producers and consumers.
2. http://www.philly.com/philly/business/20080425_Gas_prices_climb__crude_falls.html Gas prices climb; crude falls
3. http://www.financialpost.com/most_popular/story.html?id=469214 Gas, oil prices to double by 2012, CIBC economist predicts
4. http://www.mileagebooks.com Meanwhile, get a mileage log to maximize your tax deductions

2008 Standard Mileage Rate

The IRS standard mileage rate for the current tax year is 50.5 cents per mile. Miles driven for medical purposes or moving are deductible at 19 cents per mile while mileage incurred for charitable organizations are deductible at 14 cents per mile.

If oil prices continue to rise (all indications are that gasoline prices will remain high), the U.S. Congress may promote a mid year rate adjustment as was instituted in 2005. Check back with this blog for updates regarding mileage rates.

Mileage rates for previous tax years (back through 2003) are available at: http://www.mileagebooks.com/IRS-Tax-Regulations/IRS-Tax-Regulations/Current-Standard-Mileage-Rate.

This is Your Forum

Welcome to Business Mileage Report moderated by me, TaxMiles. All comments and questions from readers about business vehicle expenses and related tax issues are welcome.

This blog will serve as a forum where business owners and professionals can come to learn more about how expenses for their cars, trucks, vans, and other vehicles can affect their tax situations. If I can't answer your questions, hopefully one of our readers can. That is why comments are open to everyone (though I will moderate postings to ensure that they are relevant and appropriate).

I have been studying this subject since 1991 and have a lot of insight as to the various ways that businesses can manage their vehicle costs for the greatest tax benefit. Be advised that I don't believe in cheating on taxes. Promotion of illegal schemes will not be tolerated in the comments sections of this blog. However, please feel free to link to your web site if you have certain expertise that other folks might find valuable.

If you have a need for a durable, convenient mileage log, please visit our sponsor at http://www.mileagebooks.com/.