About two weeks ago, when gas prices suddenly jumped to more than three bucks per gallon, we found ourselves working a long shift that led us to order some delivery pizza. The delivery guy drove up in a rather large pickup truck, which, we guessed, didn't get great gas mileage. And it occurred to us that pizza delivery workers are probably hard hit by the increase in gas prices. At the standard IRS rate of 40.5 cents per mile, someone driving a gas hog that gets 8 mpg around town could actually have to pay more for gas than the 40.5 cents would cover. Wear and tear, depreciation, oil and other maintenance costs would be completely unreimbursed. In any event, whether they drove a Prius or a Hummer, any employees who received standard rate mileage allowances were effectively losing pay as a result of the gas price increase.
But there is some small relief on the way. The Internal Revenue Service and Treasury Department announced Friday an increase to the optional standard mileage rates for the final four months of 2005.
The rate will increase to 48.5 cents a mile for all business miles driven between September 1 and December 31, 2005. This is an increase of 8 cents over the rate applicable in the first eight months of 2005. “This is about fairness for taxpayers,” said IRS Commissioner Mark W. Everson. “People are entitled to deduct the real cost of operating a vehicle. We’ve responded to the recent gas price increases by making this special adjustment so taxpayers get the tax benefit they deserve.” In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2005. The IRS normally updates the mileage rates once a year in the fall for the next calendar year. “With many predicting a decline in gas prices over coming months, we will hold off on setting the 2006 rate until closer to January,” Everson said. Next year’s rate could be lower than 48.5 cents. While gasoline is a major factor in the mileage figure, other items enter into the calculation of mileage rates, such as the price of new vehicles and insurance.
The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of the extra burden of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage. Under DLSE guidelines, the same rate may be used by California employers to satisfy their obligations under Labor Code § 2802 to repay all employment-related employee expenses.