The Internal Revenue Service has raised the standard business mileage rate for automobile expenses for 2005 by three cents -- the largest one-year rise ever.
The agency said that the hike was primarily prompted by higher prices for vehicles and fuel during the year ending in September. That rate, effective Jan. 1, 2005, will be 40.5 cents per mile for all business miles driven, up from 37.5 cents a mile in 2004.
The rates used to compute the deductible costs of operating an automobile for charitable, medical or moving expense purposes were also raised. Those rates will be 15 cents a mile when computing deductible medical or moving expenses, up from 14 cents in 2004, and 14 cents a mile when giving services to a charitable organization.
The standard mileage rates for business, medical and moving purposes are based on an annual study of the fixed and variable costs of operating an automobile. An independent contractor, Runzheimer International, conducted the study for the IRS.
