IRS increases gas-mileage deduction in midyear

Associated Press

WASHINGTON

The Internal Revenue Service is increasing the tax deduction motorists can take for using private vehicles for business, a rare midyear move sparked by high gas prices.

Starting July 1, motorists who use their personal vehicles for business will be able to deduct 55 1/2 cents a mile from their taxable income, the agency announced Thursday.

That’s an increase of 4 1/2 cents from the first six months of the year.

The rate also is used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

Workers who receive the reimbursement don’t have to report it as income, as long as the payments don’t exceed the IRS benchmark.

The average gas price is about $3.61 a gallon, up from $2.74 a year ago, according to AAA.

The IRS normally updates the mileage rates once a year in the fall for the next calendar year.