Mileage Rate Increases...Is it Enough?

Are you tracking mileage for your business? If so, you can now deduct 58.5 cents per mile for the business use of your vehicle. The IRS announced the new rate change, Monday. The rate is effective from July 1 through Dec. 31, 2008. It's equivalent to an extra eight cents in your pocket per business mile. It may not seem like much, but it counts.

Why the unexpected change in rates? The move is seen as an effort to help small businesses deal with the rising cost of gas. "Rising gas prices are having a major impact on individual Americans. Given the increase in prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile," said IRS Commissioner Doug Shulman. The IRS normally evaluates the rate annually, in the fall, and it is then effective for the following calendar year.

For consultants and freelancers who spend quite a bit of time travelling in the car, this mid-year perk could add up. And, with major airlines continuing to increase airfare and baggage fees, this rate change by the IRS could be a good incentive to use your car for some of those client road trips. Then again, it may not be enough to offset the need to increase your rates to cover rising expenses. What do you think - is it enough?