Apparently, the IRS has heard the hue and cry coming from the heartland and has announced that with the recent sharp increases in fuel prices, the standard mileage reimbursement rate will increase from 40.5 cents to 48.5 cents per mile effective for all business travel between September 1, 2005 and the end of the calendar year.

If your employer pays less than the IRS rate, you are allowed to deduct the difference on your tax return as a miscellaneous itemized deduction.  Just bear in mind that in order to take advantage of  miscellaneous deductions, they must exceed 2 percent of your adjusted gross income.

This is certainly welcome news for our clients who travel quite a bit for business.  It is not yet clear where the rate will go after December 31, but this mid-year adjustment should at least provide some relief as gas prices hover around $3 per gallon.

The IRS also raised the  mileage reimbursement rate for medical and moving expenses from 15 cents to 22 cents a mile but the mileage reimbursement rate for providing services to charitable organizations which is set by Congress, not the IRS, was not increased and remains at 14 cents per mile.