The IRS today announced that the per mile deductible rate for operating an automobile for business purposes is going up to 55.5 cents from 51 cents a mile. Moreover, the rate for calculating deductible medical and moving expenses also increased by 5.5 cents to 23.5 cents a mile.
This change takes effect starting in July. Therefore, for the first six months of 2011, the rate is 51 cents for business expenses (19 cents for medical and moving) and from July through December 31st it is 55.5 cents (23.5 cents for medical and moving).
This announcement is atypical during this part of the year because the IRS usually makes these adjustments during the Fall months (September through December) with any policy changes taking effect the following year.
This change largely helps those businesses that are using the “Standard Mileage Rate Method.” Alternatively, businesses can use the “Actual Expenses Method,” which would deduct such things as depreciation, tires, insurance, gas, oil, property and gas taxes, licenses, registration costs, lease payments and so forth. It is generally acceptable to figure out your deduction using both methods and take the method that leads to the largest deduction.
It seems the IRS is acting quickly to help businesses with the rising cost of gasoline and diesel prices (aka inflation) that is taking a heavy toll on economic growth. Just today, the Obama administration announced it would release 30 million barrels of oil from the U.S. Strategic Petroleum Reserve in order to put downward pressure on oil prices.