IRS changes include raising business mileage reimbursement rate for ‘08
Dec 29th, 2007 by Afiya
Companies could offer higher mileage reimbursement rates to their employees in 2008, thanks to a change in Internal Revenue Service guidelines.
The IRS has increased the standard mileage rate deduction for business miles to 50.5 cents per mile for 2008 - up from 48.5 cents in 2007.
It’s not a huge increase, but it is a new high for the business mileage rate.
“It will allow the companies to give the employees a larger reimbursement,” Bob Scharin, RIA senior tax analyst at Thomson Corp.’s Thomson Tax & Accounting in New York.
Scharin said the mileage rate for business is designed to cover the price of gas and oil, as well as depreciation or leasing costs and insurance. If a company is providing the car, the reimbursement rate does not apply. This rate is used if an employee is driving his or her own car on company business.
A higher rate means a company could help cover the higher costs of gas - and get a better tax break.
“A lot of companies just follow this rate for the reimbursement rate,” said Mark Luscombe, principal analyst for CCH Inc., a Wolters Kluwer business in Riverwoods, Ill.
If someone is self-employed, the mileage rate could be used if the taxpayer keeps track of his or her mileage for business. You’re not going to be able to deduct the cost of the lease if you take the standard mileage deduction.
As of Jan. 1, the new mileage rate for medical and moving purposes will actually go down slightly to 19 cents a mile, from 20 cents in 2007.
Travel costs to a doctor’s office, hospital or special clinic are considered deductible medical expenses. But medical expenses are deductible only if you itemize and only if you have expenses that exceed 7.5 percent of your adjusted gross income.
The medical expenses that you paid out up to 7.5 percent are not deductible. If you had to pay tolls or parking in order to see the doctor or to go to the hospital, you’d be able to add those expenses too.
When it comes to moving for a new job, you could deduct those standard miles if your new company did not reimburse you for that cost.
To deduct unreimbursed moving expenses, the distance between your new job location and your former home must be at least 50 miles more than the distance between your old job and your former home or apartment.
And you must work full-time for at least 39 weeks during the 12-month period immediately following your arrival at the new job location. The 39 weeks of work doesn’t have to be consecutive or with the same employer. Your family does not have to travel with you. If you lose your job for another reason than willful misconduct, the 39-week requirement is waived.
When it comes to people who drive their cars to help out a charity, though, the reimbursement rate for 2008 remains the same as for 2007. The rate is 14 cents per mile driven for charitable organizations.
Susan Tompor is the personal finance columnist for the Detroit Free Press.
