The IRS announced today that the standard mileage rates for the final six months of 2008 will increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through Dec. 31, 2008.

This is an increase of eight (8) cents from the 50.5 cent rate in effect for the first six months of 2008,

The IRS went on to say that the mileage adjustment was made because of Rising gas prices and while gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs. (Announcement 2008-63)

The new six-month rate for computing deductible medical or moving expenses will also increase by eight (8) cents to 27 cents a mile, up from 19 cents for the first six months of 2008. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

The actual cost often reflects the true and correct expenses to operate the vehicle, but many taxpayers use the standard mileage rate because of the bookkeeping involved with actual cost. Taxpayers are responsible to keep a accurate record of all fuel purchases, oil, and maintenance cost. Too often taxpayers forget more deductions then they keep. But the car itself, keeps tracks of all miles and the day book tells you where you have been and records can be reconstructed immediately if you should forget to record miles to and from business appointments.

There are new devices out there that even make this task less painful and save you thousands of dollars in taxes. When you look at the amount of the mileage deduction, you begin to understand that this is a large deduction that should not be taken lightly.

Say you travel 102 miles during a business day and you do this 2 times a week. Lets do the math. For the first half of the year you did 26 weeks of 2 x 102 miles = 5304 x 50.5 cents per mile = $2679 for the first half of 2008.

For the second half of 2008 the amount of deductions for the business miles would be: 5304 x 58.5 cents = $3103 for the same period of time. The total mileage deduction for business miles alone would be $5782.00

Unless your employer reimbursed you for a portion of these miles, you would have a tax write off of at lease $5782.00 for business use of your auto. If you are self-employed this is a major deduction and more then likely will be more because you are not tied to the rule of having to go to the job first and then departing for business related destinations before your mileage deduction kicks in.