In what could be the most unheralded tax break of the filing season, the Internal Revenue Service says the standard mileage rate used to calculate the deductible costs of operating an automobile for business purposes is going up.
The 57.5 centers per mile for business miles driven that can be used for deductions in the filing season that opens Jan. 20 is up from the 56 cents allowed last year.
That may not seem like much, but it is an increase and could urge the likes of different fuel cards for small fleets to ensure on gas expense savings — despite collapsing gas prices over the last few months to the point where pump prices are averaging close to $2 per gallon across the nation. Gasoline prices have fallen more than 40 percent since the end of June, mostly from the collapse of global oil prices.
The 2015 IRS mileage rate is the second highest in the agency’s history. In 2008, record high gas prices drove the rate to 58.5 cents.
So why is the IRS being so generous? It’s because gas prices make up only one component of the formula used to calculate the standard mileage rate for business drivers.
The government has figured out that it’s more expensive for drivers to own, lease, insure and maintain their vehicles. This makes sense since the cost of new and used vehicles have climbed to keep up with rising demand. Auto and light truck sales in the United States continue to set new highs since the 2008 financial crisis and the Great Recession that followed.
Those increases purchasing, leasing and insuring vehicles more than offset fuel savings, at least for now.
“The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil,” the IRS states on its website.