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Citing higher gasoline prices, the IRS has increased the optional business standard mileage rate from 50.5 cents per mile to 58.5 cents per mile for July-December of 2008. Taxpayers can use the optional standard rates to calculate the deductible costs of operating an automobile for business. This is also the rate at which your company will typically reimburse you for business mileage using your personal automobile.

This update is great news for business owners who use the rate to calculate deductions and employees who get reimbursed. Normally, the IRS Mileage Rate is set once for the entire year, so it’s nice to see that this special adjustment was made, considering how high gas prices have risen this year. The standard mileage rate covers not just gas, but also all other costs of operating the vehicle. Business typically have two options for deducting transportation expenses. They could either buy a company car and pay for all of the insurance, gas, maintenance, etc, or use personal vehicles and reimburse at the standard mileage rate. The standard rate is used to simplify reimbursements, but actual costs of operating a personal car for business use may also be used in some cases.

As part of the update, the new six-month rate for computing deductible medical or moving expenses will also increase by eight cents to 27 cents a mile.