To help businesses and individual taxpayers cope with soaring gasoline prices, IRS Commissioner Mark Everson announced an increase in the standard optional mileage rate for the rest of the year.

In a conference call with reporters, Everson said the rate from September 1 until December 31 will be 48.5 cents a mile -- an 8-cent increase above the rate in effect for the first eight months of 2005. He added that because gas prices are hard to predict and because prices may decline in coming months, the IRS will hold off on setting the 2006 rate until January approaches.

The commissioner said the IRS is taking that "extraordinary" step because "it is entirely appropriate, given the fact that taxpayers are entitled to this deduction. This is not something [in which] we're just giving a benefit to people that they're not entitled to or a change ...in the composition of the tax code."

The mileage rate for moving expenses also will be adjusted, Everson said. The new four-month rate for computing deductible medical or moving expenses will be 22 cents a mile, an increase of 7 cents, according to an IRS press release on the new mileage rates. The rate for providing services for charities, currently 14 cents a mile, is set by statute, not the IRS, he noted. "In order to change that, Congress has to act," he said.

Source: http://www.taxanalysts.com