Monday, December 1, 2008

Lower gas prices mean lower mileage rates

For those of you enjoying lower gas prices when you go to the pump (and who isn't), your old friend, the Internal Revenue Service, wants to spoil your fun.

The IRS is lowering some of its automobile-mileage deduction rates for 2009 to coincide with falling gas prices. The 2009 rates are slightly lower than rates for the second half of 2008, which were raised in response to the spike in gas prices. The standard rate for business use beginning in January 2009 will be 55 cents a mile, down from 58.5 cents since July.

When the mid-year deduction rate took effect earlier this year, a gallon of gas cost an average of $4.05, up nearly $1 from the beginning of 2008. Prices in recent months have fallen, however, to a national average of $1.82 a gallon.

In the past few years, the mileage reimbursement rate had risen sharply from 40.5 cents in 2005, to 44.5 cents in 2006, to 48.5 cents in 2007, to 50.5 cents in the first half of 2008 before the hike to 58.5 cents in July 2008. Yet, the 55-cent deduction rate for average gas prices of $1.82 a gallon are still much better than the 40.5-cent rate in 2005, when the average gas price was $1.75 a gallon.


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