The almighty tax deduction holds a special place in the heart of every taxpayer. After all, how else can you reduce the amount of tax you owe? Well, some of these deductions change each year, which means you need to stay on top of them.

The mileage deduction is the most popular modified deduction. Each year it increases or decreases depending on oil prices and such. Given the gas prices this year, you can probably guess which direction the deduction is headed for 2008.

Most people assume the mileage deduction can only be claimed for pavement crossed on a business purpose. While this is the most common deduction, there are actually two other facets you can also claim if you are eligible.

The first variation is mileage incurred for medical or moving purposes. Arguable, those are two different subjects, but who is going to argue with the IRS. The third variation is a deduction for mileage incurred in the service of a charity.

The IRS sets the deduction amounts each year based on the projected figures for the next fiscal year. It has just released the 2008 figures and the good news is the deduction amount for business miles has gone up.

Consider the fact that you are spending anywhere from $2 something to nearly $4 a galloon of gas. The IRS is going to let you write-off 50.5 cents for every mile you drive on business in 2008. That can really help offset those prices at the pump.

The deduction for the medical and moving mileage for 2008 is much less, coming in at 19 cents a mile. Charitable driving miles are even lower with the rate being 14 cents a mile. Again, make sure you comply with relevant tests before claiming the deduction.

Since we are talking about taxes, nothing could be so simple as the above. There are relatively easy tests that have to be passed before you can claim each deduction above. Make absolutely sure you comply with them.

Tags: Business

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