Pay At The Pump – Recover On Your Tax Return

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by IRS Helps You Recover Some of Your Gas Costs

Being notified the IRS has done something is usually a scary proposition. The number on fear of most people is an audit, but the IRS actually can be helpful. When taxpayers have a universal financial problem, the agency acts fast.

One of the great deductions available in the tax code is the business mileage deduction. If you drive on business matters, you can deduct the mileage at the end of the year by multiplying your total miles by a figure set by the IRS.

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The cost of fuel would seem to be a major factor considered when the IRS sets the figure and it is. There are others however. They include things such as insurance, vehicle depreciation and other issues.

The agency notifies the public of the business mileage deduction figure a few months before the beginning of the calendar year. 50.5 cents was the magic figure set for 2008.

The business mileage deduction rate is a projection. When things happen that are not projected, the IRS can change it. When Hurricane Katrina took out refineries in the gulf, for instance, the IRS cranked the deduction up.

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Whether it is profiteering, a weak dollar, peak oil or some other reason, oil prices have shot up in 2008. In San Diego, we are closing in on $5 a gallon. This is in comparison to 2002 when we were paying only $1.75 for the same gas.

While the rest of the government twiddles its collective thumbs, the IRS is doing something to help people. Who would’ve guessed it? The agency has cranked the business deduction rate up to 58.5 cents for the remainder of 2008.

So, how do you calculate all of this? Well, it is actually pretty simple. Any business mileage you undertake from January 1 through June 30 is deductable using the 50.5 figure. Mileage after that is done at the 58.5 percent rate. Just add the two totals for your deduction.

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Business miles are not the only transportation deduction getting a bump. You can deduct mileage incurred for moving for a job. The rate for the first six months of 2008 is 19 cents, but the final six months now have a rate of 27 cents.

The tax code also contains a provision for a deduction for mileage incurred while helping a charity. The IRS does not control this deduction. Only Congress can modify it. As such, there is no change for fuel prices.

The spike in gas prices is certain having an effect on everyone. The new deduction figures set by the IRS aren’t the answer to high prices, but at least the higher deductions will help take some of the bite out of the cost when tax time comes.

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