IRS increasing tax deduction for gas mileage starting July 1st

High gas prices, Realtors feel the pinch

Today, as gas prices average $3.63 a gallon nationally, cities like Chicago have broken the $4 barrier and are now at $4.06. This time last year, a gallon averaged $2.66.

Rising costs have put the Obama administration under pressure leading to the President’s announcement that they will release 30 million barrels of oil from our nation’s emergency reserve, citing lost oil supplies due to Mid East “turmoil” (or wars, or “not wars” depending on which aisle you sit on).

Another response by the government is the Internal Revenue Service’s nearly unheard of move in increasing the tax deduction that motorists like Realtors can take for using their private vehicles for business, starting July first. The IRS typically waits until the end of the year to make or announce changes to any deductions which is why this change is not only a welcome surprise by many, but a clear response to rapidly rising gas prices.

55 cents per mile now

At the end of this week, anyone using their cars for business can deduct 55 cents per mile from the total taxable income, an increase of four cents from the first half of this year.

Four cents per mile is a considerable increase that adds up for a real estate professional given the wild amounts of driving most Realtors do on a daily basis, many indirectly officing out of their cars.

“This year’s increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the recent increase in gas prices,” said IRS Commissioner Doug Shulman. “We are taking this step so the reimbursement rate will be fair to taxpayers.”

Deductions up for moving mileage as well

Along with announcing a change to the deduction rates for gas, the IRS also increased the rate for calculating moving expenses which will rise from 19 cents per mile to 23.5 cents a mile, a change that Realtors will be emailing to their clients or blogging about as a bit of good news.