The Silver Lining of High Fuel Prices
Author: PayAtThePump-GetTaxBreak Total views: 20 Word Count: 457
Being notified the IRS has done something is usually a scary proposition. The number on fear of most people is an audit, but the IRS actually can be helpful. When taxpayers have a universal financial problem, the agency acts fast.
One of the great deductions available in the tax code is the business mileage deduction. If you drive on business matters, you can deduct the mileage at the end of the year by multiplying your total miles by a figure set by the IRS.
The cost of fuel would seem to be a major factor considered when the IRS sets the figure and it is. There are others however. They include things such as insurance, vehicle depreciation and other issues.
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.
Whether it is profiteering, a weak dollar, peak oil or some other reason, oil prices have shot up in 2008. In San Diego, we are closing in on $5 a gallon. This is in comparison to 2002 when we were paying only $1.75 for the same gas.
To its credit, the IRS has voluntarily stepped forward in reaction to the fuel price spikes. It has announced that it has the discretion to change the business mileage deduction rate and has set itat 58.5 cents for the last six months of 2008.
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.
There is one other deduction we need to mention. You can deduct certain mileage incurred while working with a charity. This is set by Congress and cannot by adjusted by the IRS, so there is no change.
Fuel prices are projected to only go higher for the foreseeable future. While the bump in the mileage deduction helps, it may not be the last one in 2008. Keep an eye out for more changes.
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