IRS Increases Mileage Rate to 55.5 Cents per Mile

Gasoline price increases has prompted the
Internal Revenue Service to increase the business mileage rate to 55.5 cents per mile for miles driven from July 1, 2011. This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011, as set forth in Revenue Procedure 2010-51.

"This year's increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the recent increase in gas prices," said IRS Commissioner Doug Shulman. "We are taking this step so the reimbursement rate will be fair to taxpayers."

Paul Altavena and Michael Young of ConnectPay said employers should be careful in calculating the 2011 milage rate when using the optional mileage rate instead of actual costs, pointing out that the increase is only effective for the last 6 months of 2011. January through June of 2011, employers will need to calculate at the current rate of 51 cents per mile. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

The IRS normally updates the mileage rates once a year in the fall for the next calendar year, but made the unuusal exception in recoginitoin of the gasoline price increases. Therefore, warned Paul and Michael, employers should watch for future releases from the IRS on this blog and our twitter account about the ratges for 2012.

The last six-months of 2011 will also see the rate for computing deductible medical or moving expenses increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011.

The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

A chart of the mileage current and new rates can be viewed in IR-2011-69, June 23, 2011.