IRS Reacts to High Gas Prices
As most small businesses are aware, a tax deduction can be taken for mileage incurred in normal business travel. In light of high gas prices, the IRS has upped the mileage rate.
Major Increase
Nothing is worse than sitting at the pump and watching the dollar figures tick over. In fact, I paid over $3.30 a gallon this morning in San Diego. What a way to start the week! Fortunately, the IRS is granting some relief.
In 2004, the IRS set the standard mileage deduction rate at 40.5 cents per mile for 2005. Obviously, gas prices were just a bit lower in 2004. Apparently, employees at the IRS have noticed this and action is being taken.
The IRS has announced the standard mileage rate is being increased from 40.5 cents to 48.5 cents. While this is the single largest increase ever issued by the IRS, there is a downside. The 48.5 cent figure only applies for mileage undertaken from September 1, 2005 through December 2005.
The less well known medical and moving mileage rate is also being upped. Previously set at 15 cents a mile, the IRS is increasing the rate to 22 cents a mile. Again, the increased rate is only applicable for the last four months of 2005.
Comment
I dont want to sound greedy, but I seem to remember gas prices being outrageously high prior to September 2005. Others have apparently expressed the same thought to the IRS. The response of the Agency is it expects gas prices to drop significantly over the next few months, which should make everything a wash. Undoubtedly, this is news to the oil companies!
Richard A. Chapo is with http://www.businesstaxrecovery.com - Stop overpaying small business taxes. Visit http://www.businesstaxrecovery.com/articles to read more business tax articles about tax relief and tax help.
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