IRS Raises 2011 Mileage Rates Starting July 1, 2011

The IRS has announced it is increasing the business mileage rates for 2011 to 55.5 cents a mile starting July 1, 2011. This is obviously a positive development for taxpayers. 

For the second time in the last 5 years, the IRS is making a middle of the year change to a tax deduction. In recognition of spiraling fuel prices, the agency is adding a whopping 4.5 cents to the mileage deduction. The deduction is supposed to be representative of the cost of traveling for business, so it makes sense. Still, the IRS is not exactly known for giving taxpayers a gift, so this is one occasion where the agency should get kudos. 

When you prepare your taxes in April 2012, you will need to do two mileage calculations. For all miles traveled during the first six months of 2011, the rate to use will be 51 cents. If you drove 1000 miles on business, the deduction would be $510 [51 cents x 1000 miles]. 

The calculation for the last six months of the year will use the new rate. Using our example in the previous paragraph, the deductions would increase to $555 [55.5 cents x 1000 miles]. Obviously, you will want to keep a mileage book marking the distinction so that you can recall what the heck you were doing in the middle of 2011. For someone who can’t recall what I ate for lunch yesterday, this is an important thing! 

Will the IRS be making any other changes mid-year that favor taxpayers? It is highly unlikely. Changing the mileage rate is a one off event, and unlikely to happen again in the near future unless oil prices continue to fluctuate wildly. Personally, I would rather see the deduction reduced if it meant I was paying a buck a gallon at the pump!