IRS keeps mileage reimbursement rate at near-historic high

Published January 18, 2012

| FoxNews.com

Finally, an upside to high gas prices, though perhaps not for the government's coffers. 

The IRS has announced that it will keep its mileage reimbursement rate at 55.5 cents a mile, at least for now, after initially approving the increase last summer. 

The rate, which has been north of 50 cents a mile since 2008, was raised in June in response to the spike in gas prices. The result is a rate that continues to be worth far more than the actual cost of gasoline. 

Take, for instance, the gas costs for a new Honda Accord. With its 27-miles-per-gallon fuel economy, it costs roughly 12.5 cents per mile to drive. Yet businesses that use the IRS rate, as many do, can reimburse their employees 55.5 cents per mile -- an expense that is tax deductible. 

That represents a near-term windfall for the average driver. While the average gallon of gas costs $3.38, the IRS rate would allow the Accord driver to reap nearly $15 in return for every gallon. 

What gives? 

The IRS, which calculates the rate, isn't just factoring in fuel costs. Depreciation and other factors play a role in determining the reimbursement rate. 

"While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs," IRS spokeswoman Sara Eguren said in an email. 

The estimated depreciation cost in 2012 is 23 cents a mile, according to the group Small Business Taxes and Management. That still brings the cost of gas and depreciation to just over 35 cents a mile. 

According to the latest government notice, federal workers who use their own cars are still operating under the older rate of 51 cents a mile. But for every gallon of gas those workers buy, they're still making a roughly $10 profit, courtesy of the government.

The IRS rate reached a high in late 2008, at 58.5 cents a mile. 

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