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IRS raises mileage rate on higher gas prices

September 9, 2005

WASHINGTON (Reuters) – The U.S. Internal Revenue Service on
Friday increased a mileage rate used to compute the deductible
costs of operating an automobile for business due to the sharp
rise in gasoline prices.

It also delayed setting the 2006 rate, saying gas prices
may decline before the start of the new year.

“This is about fairness for taxpayers,” said IRS
Commissioner Mark Everson. “People are entitled to deduct the
real cost of operating a vehicle. We’ve responded to the recent
gas price increases by making this special adjustment so
taxpayers get the tax benefit they deserve.”

The tax-collecting agency boosted the optional standard
mileage rate to 48.5 cents a mile for all business miles driven
in the last four months of 2005, up 8 cents from the rate used
so far this year.

The optional business standard mileage rate is used to
compute the deductible costs of operating an automobile for
business use in lieu of the extra burden of tracking actual
costs. This rate is also used as a benchmark by the U.S.
Government and some businesses to reimburse employees for
mileage.

The IRS normally updates mileage rates once a year in the
fall for the next calendar year. But it said it would delay
setting the 2006 rate until nearer to January because gas
prices could decline over the next few months.

Gas prices have soared above $3 a gallon and far higher in
some places because of a sudden drop in supplies following
Hurricane Katrina.




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