Tax News Update - 4th Edition
Business, Medical and Moving Mileage Increases for Final Six Months of 2022
The business mileage rate is increasing by 4 cents, to 62.5 cents per mile, while the medical and moving mileage is also increasing by 4 cents, to 22 cents per mile, for the final six months of 2022, the IRS recently announced. The previous rates of 58.5 cents for business mileage and 18.0 cents for medical and moving mileage still apply for the first six months of 2022.
In recognition of the recent spike in gas prices, the IRS made this special adjustment for the second half of 2022. The new rate is effective July 1, 2022. The IRS normally updates the mileage rates once a year in November or December for use during the subsequent year.
“We are aware a number of unusual factors have come into play involving fuel costs, and we are taking this special step to help taxpayers, businesses and others who use this rate,” said IRS Commissioner Chuck Rettig in an IRS press release.
The value of your mileage deduction could increase 7%
Here’s how the business mileage increase could affect the bottom line on your 2022 tax return:
Example: You’re in the 12% tax bracket and have 1,000 business miles to report on your 2022 tax return. You drive 500 miles the first six months of 2022, which will be recorded using the 58.5 cents rate. You drive another 500 miles the second six months of 2022, which will be recorded using the 62.5 cents rate.
500 miles x 58.5 cents = $292.50 deduction x 12% tax rate = $35.00 reduction in taxes
500 miles x 62.5 cents = $312.50 deduction x 12% tax rate = $37.50 reduction in taxes
The 58.5 cents mileage rate results in a $292.50 tax deduction for you. Since you’re in the 12% tax bracket, this deduction will lower your taxes by $35.00.
The 62.5 cents mileage rate results in a $312.50 tax deduction for you. With a 12% tax rate, this deduction will lower your taxes by $37.50, which is $2.50 or 7% more than the $35.00 deduction you received for the first six months of 2022.
A reminder to keep great mileage records
The IRS mandates that you track your vehicle expenses as they happen (this is called contemporaneous record-keeping). You’re not allowed to wait until right before filing your tax return to compile all the necessary information needed to claim a vehicle deduction. Whether it’s a physical notebook you stick in your glove compartment or a mobile phone app, pick a method to track your mileage and actual expenses that’s most convenient for you.
So be sure to keep great records so you can take advantage of this increase to the business, medical and moving mileage rates.
Proposed Tax Legislation
The following is an overview of several recent tax proposals discussed or introduced in Congress over the past several weeks. It is important that you not treat these proposals as passed legislation. Many hurdles remain before any of these legislative ideas become law. In the meantime, it is useful to see what types of tax laws may be affecting you in the future.
Freight RAILCAR Act of 2022 (House of Representatives Bill 7902): This bill, introduced May 27, proposes to amend the Internal Revenue Code of 1986 to provide a tax credit to encourage the replacement or modernization of inefficient, outdated freight rail cars.
Complete America's Great Trails Act (House of Representatives Bill 7913 and Senate Bill 4346): This bill, introduced May 26, proposes to amend the Internal Revenue Code of 1986 to allow a credit against income tax for qualified conservation contributions which include National Scenic Trails.
Police and Fire Health Care Protection Act of 2022 (Senate Bill 4312): This bill, introduced May 25, proposes to amend the Internal Revenue Code of 1986 to repeal the direct payment requirement on the exclusion from gross income of distributions from governmental plans for health and long-term care insurance.
DELIVER Act of 2022 (House of Representatives Bill 7872 and Senate Bill 4291): This bill, introduced May 24, proposes to amend the Internal Revenue Code of 1986 to increase the standard charitable mileage rate for delivery of meals to elderly, disabled, frail, and at-risk individuals.
People Over Petroleum Act (House of Representatives Bill 7871): This bill, introduced May 24, proposes to amend the Internal Revenue Code of 1986 to repeal fossil fuel subsidies for oil companies and to establish gas price rebates to individuals for 2022.
Rural IRS Accountability Act (House of Representatives Bill 7844): This bill, introduced May 19, proposes to amend the Internal Revenue Code of 1986 to improve tax filing efforts in rural areas.
Public Safety Officer Health Improvement Act of 2022 (Senate Bill 4267): This bill, introduced May 19, proposes to amend the Internal Revenue Code of 1986 to create a tax credit for qualified health insurance premiums of eligible retired public safety officers.
Inflation-Adjusted Education Investment Act (Senate Bill 4265): This bill, introduced May 19, proposes to amend the Internal Revenue Code of 1986 to increase and provide an inflation adjustment for the limitation on distributions from qualified tuition programs that may be used for elementary and secondary tuition.
The above are proposals. There are many steps each bill must go through before they are signed into law. Information retrieved from: GovTrack.us https://www.govtrack.us/congress/bills/subjects/taxation/6342