July, 2008 Tax Tip
Auto Mileage Rates and Pending Legislation
Increase in Auto Mileage Rates
Due to the skyrocketing cost of fuel, the IRS recently announced an increase in mileage rates for business, medical, and moving miles. Effective July I, 2008 the rate for business miles will increase to 58.5 cents a mile (up from 50.5 cents). The rate for medical and moving miles will increase to 27 cents a mile (up from 19 cents a mile). Charitable mileage will remain at 14 cents a mile. The charitable rate is set by statute, not the IRS.
Therefore, it will be necessary (as it was a few years ago when there was a rate change during the year) for taxpayers to keep track of their mileage incurred before July 1 and after June 30. As auto expenses are a virtual certainty to be scrutinized in the event of an audit, I strongly suggest that you keep written records to substantiate your mileage for all of your driving related to the above items.
Pending Tax Relief
Some tax incentive and relief provisions recently passed by the House include:
Low and moderate income first-time homebuyers would be eligible for a refundable tax credit of 10% of the purchase price of their home with a cap of $7,500 ($3,750 for married couples filing separately). Recipients would be required to repay the amounts they receive over 15 years.
Single filers taking the standard deduction would be allowed to take a deduction up to $350 for real estate taxes paid; joint filers would receive a $700 deduction. This would be available for 2008 only.
Several popular but temporary tax provisions that were set to expire after 2007 were extended. These include the state and local sales tax deduction, research tax credit, teachers’ classroom expenses deduction, and higher education tuition deduction.
LATE DEVELOPMENT: The House just passed a bill that would grant relief from the spread of the alternative minimum tax (AMT) to an estimated 20 to 25 million taxpayers. The relief comes in the form of an increase in the AMT exemption. This is the same type of “patch” that has been enacted in each of the past few years, only this time it comes early enough to be taken into account in doing appropriate 2008 year-end planning. It is estimated that the average tax relief would be around $2,300 with about 2/3 going to taxpayers with incomes of $127,000 or more. The bill faces opposition from the White House due to its proposals to increase taxes in certain other areas to maintain tax neutrality. It is unlikely that the increases would affect most of the readers of this newsletter..
IMPORTANT: The above pending provisions have yet to be enacted into law.
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