IRS Makes Rare Change To Car Mile Deductions To Help Struggling Americans With Gas

( Gas prices are so far out of control that even the Internal Revenue Service is starting to pay attention.

In response to rising gas prices, the IRS will increase its optional standard mileage rate for all business use. Starting July 1, that number will increase to 62.5 cents for every mile, a 4-cent-per-mile increase over the current rate of 58.5 cents.

The IRS typically doesn’t make an increase during a calendar year. The last time they did so was back in 2011. But, with gas prices so ridiculously out of control — with the average price of a gallon of regular gasoline being over $5 — the IRS felt it had to do something to help hard-working American businesses.

The U.S. Bureau of Labor Statistics recently reported that gas prices have increased 48.7% over the last 12 months, through the end of May.

The standard mileage rate that the IRS sets is one of the key benchmarks that are used by private businesses and the federal government in determining how much they’ll reimburse employees for any out-of-pocket expenses they incur while driving for the job.

The rate doesn’t take into consideration only the cost of actually filling up the vehicle gas, but also some other expenses that are associated with business-related driving. Some of these other factors include the increased costs of repairs, car insurance and possibly even buying or leasing a new or used vehicle.

While this is a welcome move by the IRS, it’s certainly not going to help everyone. Most companies and the federal government don’t reimburse employees for the driving that’s required to travel to and from their home to the office, for example.

At the same time, any increase is a good one for the part of the general public that does benefit from mileage reimbursement programs.

Even though the IRS has increased their standard mileage rate, that doesn’t mean eligible employees will automatically qualify for that amount. As Jackson Hewitt Tax Service’s chief tax officer Mark Steber explained:

“Companies are not required to reimburse based on the federal mileage rate, although most do.”

Companies that chose to reimburse at the increased rate will be the ones that end up absorbing the higher costs of gas. As Steber said:

“Otherwise, their employees were absorbing that cost of travel expense, and that was not likely a long-term viable plan, at least for keeping happy employees.”

It is difficult to assess how many companies will actually abide by the new IRS standard mileage rate. Some experts believe that each individual company will make that decision based on the financial condition of the company in question.

As is obvious to many, some companies are thriving during the current economic environment, while others are struggling to get by. That latter group may be more hesitant to increase the reimbursement rate to employees, as they are having a tough enough time as it is and can’t