Reporting systems need to be updated quickly. The new rates used to calculate the deductible costs of operating a vehicle for business, medical, or moving purposes are effective July 1, 2008 through December 31, 2008.

New mileage rates compared to first half of 2008
According to the IRS, the new rates better reflect the true cost of operating a vehicle. The adjusted standard mileage rates for the use of a car (including vans, pickups, or panel trucks) are:

Driving purpose	Old rate (per mile)	New rate (per mile)
Business Medical or moving Service to charitable organization	50.5 cents 19 cents 14 cents	58.5 cents 27 cents no change, set by law

Taxpayers cannot use the business standard mileage rate if they:

• Claimed accelerated depreciation (under MACRS) or a Section 179 deduction for the vehicle in a prior year
• Use the vehicle for hire (such as a taxi)
• Use more than four vehicles simultaneously (as in fleet operations)
• Lease the vehicle, unless the standard mileage rate has been used consistently for the entire leased period

According to Andy Biebl, tax principal with LarsonAllen, mid-year adjustments have occurred before. Businesses that follow the rates should update their processes by the time the new rates go into effect. This can be a hassle for employers who must quickly alter their expense reporting systems and paperwork.

As always, taxpayers have the option to calculate the actual costs of using their vehicle rather than using the standard mileage rates. Even when the mileage rates are used, parking fees and tolls may be deducted as additional expenses.

For additional information, contact us or access the IRS Information Release IR-2008-82.