IRS Optional Standard Mileage Rate Increased to 55.5 Cents

The IRS optional standard mileage rate is being increased from 51 cents per mile to 55.5 cents per mile starting July 1, 2011.  The IRS normally adjusts the mileage rate each fall for the following calendar year.  However, this year, due to high fuel prices, the IRS is making an additional adjustment to the rate halfway through the year.  The 55.5 cents per mile rate will be effective until December 31, 2011.

Looking back, the IRS adjusted the rate part-way through the year in 2005 and in 2008 as well.  It peaked at 58.5 cents per mile back in the second half of 2008.

The standard mileage rate is used to compute the deductible costs of operating an automobile for business use.  It is ”optional” because taxpayers may choose to track their actual vehicle operating costs instead.  This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.  California employers are not required to use the IRS standard rate, but it is presumed to be reasonable.  If your employer reimburses you for mileage and is paying you less than 55.5 cents per mile after July 1st, you may want to point out the standard rate increase.