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IRS Reacts To Higher Gas Prices The IRS is an agency that has a reputation that is somewhere between Attila the Hun and baby seal hunters. While deserved, the agency actually is very responsive to current events that impact taxpayers. This includes the increase in gas prices. Under the tax code, many taxpayers can deduct mileage accrued for business purposes. The deduction is represented as a numerical figure per miles. A taxpayer simply multiplies their total business mileage by this figure to get their deduction for the year. There are many factors that go into the business mileage deduction. They include vehicle depreciation, insurance and other variable costs. One of these is, obviously, the cost of fuel to get around. The IRS sets the numerical figure that can be used for the tax deduction at the beginning of each year. For 2008, the figure declared was 50.5 cents a business mile. If you drive 1,000 miles in 2008 for business, you would be able to deduct $505.00. Every so often something happens that makes the IRS review the business mileage deduction. A classic case was Hurricane Katrina. Damage to refineries results in a jump in gas prices. The IRS reacted by raising the business mileage deduction. As you well know, 2008 has been a brutal year for gas price increases. In many parts of the country, we are closing in on five dollars a gallon for fuel. In 2005, the average cost was $2.30. Ah, for the good old days! To say that gas prices have spiked this year is a slight understatement. The IRS has recognized as much and is adjusting the business mileage deduction according. For miles incurred in the last six months of 2008, the deduction figure is now 58.5 cents. So, how do you calculate all of this? Well, it is actually pretty simple. Any business mileage you undertake from January 1 through June 30 is deductable using the 50.5 figure. Mileage after that is done at the 58.5 percent rate. Just add the two totals for your deduction. There are two other mileage deductions you may be aware of. If you must move because of a new job, you can deduct your mileage as well. That rate for 2008 was 19 cents a mile. It has been bumped for the final six months to 27 cents. The tax code also contains a provision for taxpayers to deduct mileage incurred while helping a charity. The rate for 2008 is 14 cents a mile. This IRS does not have discretion to change this rate, so it has not been adjusted. It is unclear if Congress will act on it. The spike in gas prices is certain having an effect on everyone. The new deduction figures set by the IRS aren’t the answer to high prices, but at least the higher deductions will help take some of the bite out of the cost when tax time comes. Financial Freedom: Learning How to Become Rich Using Focus

Tips To Get Out Of The Average Speeding Ticket

On July 10, 2008, in Personal Finance, by Chris Channing

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