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FTB follows IRS increased mileage rates for rest of 2008

The IRS recently announced an increase in the optional standard mileage rates for the final six months of 2008. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business, charitable, medical, or moving purposes. FTB will follow the IRS in increasing the optional standard mileage rates for the remainder of 2008.

The rate will increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through December 31, 2008. This is an increase of eight cents from the 50.5 cent rate in effect for the first six months of 2008, as described in IRS Rev. Proc. 2007-70.

The IRS normally updates the mileage rates once a year in the fall, for the next calendar year. The recent steep increase in the price of gasoline was a deciding factor in prompting the 2008 mid-year adjustment. Although the cost of gasoline is a significant contributor, other factors are also considered in the calculation, including depreciation, insurance, and other fixed and variable costs.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use instead of tracking actual costs. This rate is also used as a benchmark by many federal and state government agencies, as well as businesses, to reimburse their employees for mileage.

The new six-month rate for computing deductible medical or moving expenses will also increase by 8 cents to 27 cents a mile, up from 19 cents for the first six months of 2008. The rate for providing services for charitable organizations is set by statute and remains at 14 cents a mile.

The IRS reports the new rates in Announcement 2008-63, in the section on the optional standard mileage rates.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Mileage Rate Changes

Purpose 

Rates 1/1 through 6/30/08 

Rates 7/1 through 12/31/08 

Business

50.5

58.5

Medical/Moving    

19

27

Charitable

14

14