Mileage Deduction Sliced by IRS as Gas Prices Soar

A revised IRS deduction for business mileage takes effect today, ironically going down just as fuel prices have been going up nationwide--especially in California.

The new IRS rate is 31 cents a mile, down from 32.5 cents per mile.

Most taxpayers who use their cars for business and many employers that reimburse employees for mileage use the IRS mileage rate, although it is also possible to deduct actual operating costs. (Employers are not required to reimburse employees at any particular mileage rate.)

The mileage change was scheduled to go into effect Jan. 1, but was delayed after businesses protested that they had received insufficient advance notice of the adjustment. In particular, companies wanted time to revise computer programs.

The rate was lowered both because of lower fuel prices in recent years and because automobiles last longer than they once did, reducing depreciation rates.

Although fuel prices have climbed nearly 15 cents a gallon in California in recent weeks, oil prices remain near historical lows. In fact, with inflation taken into account, gasoline prices fell to their lowest levels in history early this year.

A weighted average that includes all grades of gasoline is up to about $1.09 per gallon nationwide, compared with a March 1998 low of $1.07 per gallon, said Trilby Lundberg, editor of Camarillo-based Lundberg Survey, which tracks gasoline prices. In California, a gallon of regular self-serve gasoline averages $1.34.

Prices nationwide fell to a low of less than $1 in February before a series of refinery problems and world events boosted prices.

Liz Pulliam can be reached at liz.pulliam@latimes.com.