The IRS announced an increase to the optional standard business mileage rates for the remainder of 2005 as a result of recent fuel price increases.  The rate will increase to 48.5 cents a mile for all business miles driven between Sept. 1 and Dec. 31, 2005. This is an increase of 8 cents from the 40.5 cent rate in effect for the first eight months of 2005.

With many experts predicting a decline in gas prices over coming months, the IRS announced it will hold off on setting the 2006 rate until closer to January, so next year's rate could be lower than 48.5 cents.

The business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is used as a benchmark by many businesses to reimburse their employees for mileage.

The new four-month rate for computing deductible medical or moving expenses will be 22 cents a mile, up from 15 cents for the first eight months of 2005. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

If you have any questions about this update, please contact Karen Sanchez at 630-566-8519 or karens@sikich.com.