Be Aware of Increased Mileage Rate Deduction For The Rest of 2005

Taxpayers using their cars for business purposes should be aware that the IRS,

in a special announcement this past summer, has set the business mileage rate deduction to 48.5 cents per mile, effective September 1, 2005 through December 31, 2005. This new rate is up from the 40.5 cents per mile in effect January 1, 2005 through August 31, 2005.

This new rate is available for any documented business use of a vehicle. Taxpayers should sure to document any business miles in a mileage log.

Without written documentation, in an audit, the IRS would likely disallow any business mileage deduction.

Usually, the IRS announces in October what the business mileage rate will be for the following calendar year. However, this year, the IRS has decided to wait until very late in the year to announce what the rate will be for 2006. According to IRS Commissioner Mark Everson, “With many predicting a decline in gas prices over the coming months, we will hold off setting the 2006 rate until closer to January.”

Also, medical and moving expense mileage is now up to 22 cents per mile, up from 15 cents per mile for the first eight months of 2005.

Charitable mileage still remains at 14 cents per mile.