In response to soaring gas prices, the IRS announced yesterday that it will raise the standard mileage rate that taxpayers use to deduct business miles to 58.5 cents a mile, an increase of 8 cents from the current rate.

Ordinarily, the IRS sets the standard mileage rate in the fall for the next calendar year. But given the surge in gas prices, the IRS decided to make a midyear adjustment to better reflect the cost of operating a vehicle, IRS Commissioner Douglas Shulman said.

The average price of a gallon of gas was $4.072 yesterday, an increase of nearly 37 percent from a year ago, according to AAA.

The new rate will apply to miles driven from July 1 through Dec. 31 this year. Taxpayers will have to use the old rate to deduct miles driven during the first six months of the year.

The higher rate will allow self-employed workers to deduct a larger amount on their 2008 tax returns. It will also benefit many workers whose employers reimburse them for the use of their vehicles.

The federal government and most large companies base their reimbursements on the IRS mileage rate, Shulman said.

The IRS also announced an increase in the mileage rate for deductible moving and medical expenses to reflect rising fuel costs. Those rates will rise to 27 cents a mile on July 1, up from 19 cents for the first six months of 2008.

The amount that taxpayers can deduct when they use their vehicles for charitable activities will remain at 14 cents a mile. Adjusting that rate would require an act of Congress, Shulman says.

This isn't the first time the IRS has made a midyear adjustment in the standard mileage rate. In September 2005, it raised the standard mileage rate to 48.5 cents from 40.5 cents to reflect higher prices triggered by Hurricane Katrina. And in January 2006, it lowered the rate to 44.5 cents a mile.