IRS Standard Mileage Rate Increases July 1

July 2008

Rising gas prices have pushed the IRS to raise the standard mileage rate in the middle of this year. Normally the IRS issues one standard mileage rate for the entire year. Before now, the standard mileage rate for 2008 was 50.5 cents.

Starting July 1, 2008, the IRS standard mileage rate will rise to 58.5 cents per business mile.

This means that providers must keep track of what month they drove their vehicle for business purposes in 2008:

• For trips taken between January 1, 2008 and June 30, 2008, use 50.5 cents per mile.
• For trips taken between July 1, 2008 and December 31, 2008, use 58.5 cents per mile.

Providers who use the standard mileage rate may also deduct any parking fees and tolls for business trips as well as the business portion of car loan interest and personal property taxes on the vehicle. The business portion of these expenses is determined by dividing the number of business miles driven by the total number of miles driven each year. Providers can also count business miles driven by their spouse in another vehicle.

With this higher rate, providers will benefit by keeping careful records of their business trips. Such records can include: receipts, canceled checks, credit/debit card statements, photographs, calendar notations, logbooks, and other written records.

Providers can continue to use the actual expenses method for claiming expenses for their vehicle. Using this method, providers can deduct a portion of their gas, oil, repairs, tires, car loan interest, car insurance, depreciation on the value of the car, and any other expense associated with the vehicle. To use this method, providers must keep receipts for all of their vehicle expenses.

Although many providers will probably be better off using the actual car expenses method than the standard mileage method, the standard mileage method continues to be more popular because the record keeping is much easier.

For additional information on how to calculate your car expenses, see the Family Child Care 2007 Tax Workbook and Organizer.