Many businesses and governments are likely to raise their mileage reimbursement rates now that the IRS has increased its deduction for business miles 20 percent — and the self-employed are cheering.

In recognition of gasoline prices that have topped $3 a gallon in many areas, the Internal Revenue Service raised the deduction recently to 48.5 cents per mile, from 40.5 cents. It was the largest increase ever for the rate, which many governments and businesses use as a benchmark for reimbursing employees for use of their vehicles.

The new rate, which is of keen interest to self-employed people who use Schedule C in filing federal income tax returns, applies only to miles driven in the last four months of this year. Miles driven for the first eight months must be deducted at the old rate of 40.5 cents.

While employees have to itemize to take advantage of the IRS deduction, self-employed people can take it as a straight deduction.

"It can be very significant," said Wayne Witzig, a certified public accountant in Phoenix.

The IRS also increased the rate for deductible moving- and medical-related mileage expenses to 22 cents per mile, up from 15 cents for the first eight months of 2005.

Linda Booker, a real estate agent in Glendale, Ariz., who spends a lot of time in her car, said the increased deduction will really help. "I put a ton of miles on my vehicle and that's the only break I get on the gas," she said.

Witzig said housecleaners, gardeners, handymen and certain contract workers also would benefit by taking the mileage deduction. He noted that landlords who use their vehicles to manage their rental properties can take the deduction.

However, the rates won't change for taxpayers who deduct mileage for charitable activities. Because the rate for providing such services is set by statute and not the IRS, it remains unchanged at 14 cents per mile.

That makes life harder for Justine Grabowsky, a community outreach coordinator for the CASA child abuse services program in Maricopa County, Ariz. She said high gas prices have made it difficult to attract volunteers.

"We have also had many people interested in volunteering but have had to put it on hold because they just can't afford the high cost of gas," Grabowsky said.

The situation is more complex for employees reimbursed by their employers at less than the IRS rate. They can deduct the difference, but because they are not self-employed, they would have to itemize to take the deduction. Plus, the deduction must exceed 2 percent of the taxpayer's adjusted gross income.

"Most people are going to have a tough time meeting that threshold," said Bill Duncan, who teaches accounting at Arizona State University.