Standard Mileage Rate Gets Temporary Boost

The Internal Revenue Service announced an increase to the optional standard mileage rates for the final four months of 2005, due to climbing fuel prices.

The rate will increase to 48.5 cents a mile for all business miles driven between Sept. 1 and Dec. 31. This is an increase of 8 cents from the 40.5-cent rate that took effect Jan. 1.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business.

The rate is used in lieu of the extra burden of tracking maintenance and repair costs. It is also used as a benchmark by some businesses and the government to reimburse employees for mileage.

Keith Ekenseair, CPA and manager of Moore Stephens Frost’s Rogers office, said employers can deduct the entire rate for actual miles they pay employees.

Employees who may not receive the full 48.5-cent rate per mile from their employer can deduct the difference from their taxes as an un-reimbursed employee expense on Form 2106.

However, the total difference that was not reimbursed plus other miscellaneous deductions must generally exceed 2 percent of the individual’s adjusted gross income before they are allowed as a deduction on income taxes, Ekenseair said.

The IRS usually sets the mileage rate in the fall for the following calendar year, but it has delayed setting the 2006 rate to see if gas prices will decline.