By Laura Saunders
Recently, the Internal Revenue Service announced an increase in standard mileage rates taxpayers can claim for the final six months of 2011. Beginning July 1, the rate for business miles increases to 55.5 cents from 51 cents and to 23.5 cents from 19 cents per mile for medical and moving expenses. The per-mile deduction for charitable expenses remains unchanged, at 14 cents.
“This year’s increased gas prices are having a major impact on individual Americans,” said IRS Commissioner Douglas Shulman, so “the IRS is adjusting the standard mileage rates to better reflect [them].”
The business standard mileage rate is used by many taxpayers to compute deductible costs of a using a car in a business in lieu of tracking actual costs. The rate is also used as a benchmark by the federal government and many businesses to reimburse employees for mileage.
Given the increase in the price of gas, why is the rate for charitable expenses so low? Unlike the other rates, it has been set by Congress since 1984. Lawmakers passed the 14-cent deduction for 1998 and haven’t changed it since. At that point and for several years following the charitable expense deduction exceeded the per-mile allowance for moving and medical expenses (10 cents) and was nearly half the business deduction (32.5 cents).
Now the 14-cent charitable mileage allowance lags the medical/moving rate of 23.5 cents and is about one-quarter the rate for business miles. In its push for tax simplification, the American Institute of CPAs has asked Congress once again to allow the IRS to set all mileage rates and make the medical, moving, and charitable rates the same. The AICPA’s proposal also asks that the three non-business mileage rates be a fixed percentage (at least 50% and as high as 70%) of the business mileage rate.
Says Melissa Labant, a tax staffer with the AICPA, “With these changes, taxpayers wouldn’t need to use as many as three different mileage rates on a single return.”