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Important Tax Issues and the IRS

Standard Mileage Rates

The standard mileage rates enable a taxpayer using a vehicle for specified purposes to deduct vehicle expenses on a per-mile basis rather than deducting actual car expenses that are incurred during the year. The rates vary, depending on the purpose of the transportation.

Accordingly, the standard mileage rates differ from one another depending on whether the vehicle is

used for:

 Business purposes;

 Charitable purposes; or

 Obtaining medical care or moving.

Rather than using the optional standard mileage rates, however, a taxpayer may choose to take a deduction based on the actual costs of using the vehicle.

Business Use of a Taxpayer’s Personal Vehicle

Although taxpayers may no longer deduct unreimbursed employee expenses as “miscellaneous itemized deductions” to the extent the total of such expenses exceeds 2% of AGI, the 2022 alternative standard mileage rate applicable to eligible business use of a vehicle is 67¢ per mile, In order for such expenses to be deductible, they must have been:

 Paid or incurred during the tax year;

 For the purpose of carrying on the taxpayer’s trade or business; and

 Ordinary and necessary.

Provided the vehicle expenses meeting these three criteria are not reimbursed, the deductible personal vehicle expenses include those incurred while traveling:

 Between workplaces;

 To meet with a business customer;

 To attend a business meeting located away from the taxpayer’s regular workplace; or

 From the taxpayer’s home to a temporary place of work.

In addition to using the standard mileage rate, a taxpayer may also deduct any business-related parking fees and tolls paid while engaging in deductible business travel. However, parking fees paid by a taxpayer to park his or her vehicle at the usual place of business are considered commuting expenses and are not deductible.

Personal Vehicle Use for Charitable Purposes

A taxpayer may deduct as a charitable contribution any unreimbursed out-of-pocket expenses, such as the cost of gas and oil, directly related to the use of a personal vehicle in providing services to a charitable organization. Alternatively, a taxpayer may use the standard mileage rate applicable to the use of a personal vehicle for charitable purposes. The standard mileage rate applicable to a taxpayer’s use of a personal vehicle for charitable purposes is based on statute and is 14¢per mile. The taxpayer may also deduct parking fees and tolls regardless of whether the actual expenses or standard mileage rate is used.

Use of a Taxpayer’s Personal Vehicle to Obtain Medical Care

A taxpayer may also deduct medical and dental expenses to the extent they exceed the applicable percentage of his or her adjusted gross income (AGI). The vehicle expenses a taxpayer may include as medical and dental expenses are the amounts paid for transportation to obtain medical care for the taxpayer, a spouse or a dependent. A taxpayer may also include as medical and dental expenses those transportation costs incurred:

 By a parent who must accompany a child needing medical care;

 By a nurse or other person who can administer injections, medications or other treatment required by a patient traveling to obtain medical care and unable to travel alone; or

 For regular visits to see a mentally-ill dependent, if such visits are recommended as a part of

the mentally-ill dependent’s treatment.

A taxpayer who uses a personal vehicle for such medical reasons is permitted to include the out-ofpocket vehicle expenses incurred—the expenses for gas and oil, for example—or deduct medical travel expenses at the standard medical mileage rate. For 2022, the standard medical mileage rate is 21¢ per mile, The taxpayer may also deduct any parking fees or tolls, regardless of whether actual expense or the standard mileage rate is used.

Standard Deductions

2024

Filing Status

Standard

Blind/Age 65+ Add

Married Filing Jointly & Surviving Spouses

$29,200 Over 65 add $1,550 Each

Single

$14,600 Over 65 add $1,950 each

Married Filing Separately

$14,600 Over 65 add $1,950

Head of Household

$21,900 Over 65 add $1,950

Dependent

$1,300 or earned income + $450

State and Local Tax Deduction

State and local taxes paid by an itemizing taxpayer have generally been a deductible item on the

taxpayer’s federal income tax return without limit. The TCJA limits the federal income tax deduction

for state and local taxes to $10,000 ($5,000 for married taxpayers filing separately) beginning in

2018.

Home Mortgage Interest and Home Equity Loans

Under tax law in effect prior to the passage of the TCJA, the home mortgage interest deduction was

limited to home mortgage interest paid on mortgage debt—debt secured by a taxpayer’s residence—

falling into three categories:

1. Mortgages taken out before October 13, 1987, called “grandfathered debt”;

2. Mortgages taken out by the taxpayer (or spouse if married filing a joint return) after October

13, 1987 to buy, build or improve the taxpayer’s home, i.e., “acquisition debt,” but only if the

total of such mortgages plus any grandfathered debt was $1 million or less ($500,000 or less

if married filing separately) throughout the year; and

3. Mortgages taken out by the taxpayer (or spouse if married filing a joint return) after October

13, 1987 that were home equity debt, i.e., any indebtedness (other than acquisition

indebtedness) secured by a qualified residence, but only if the total of such mortgages was

$100,000 or less ($50,000 or less if married filing separately) and totaled no more than the

fair market value of the taxpayer’s home reduced by 1 and 2 above.

The dollar limits for mortgages in the second and third categories apply to the combined mortgages on

the taxpayer’s main home and any second home.

The TCJA made the following changes to the existing home mortgage interest deduction for taxable

years 2018 through 2025:

· Interest paid on home equity indebtedness—home equity loans and lines of credit, in other

words—incurred after December 15, 2017 is not tax-deductible unless used to buy, build or

substantially improve the taxpayer’s home that secures the loan;

· Interest paid on acquisition debt incurred after December 15, 2017, less any acquisition debt

incurred on or before December 15, 2017, is limited to interest paid on total acquisition

indebtedness but only if the total of such mortgages is $750,000 or less ($375,000 or less if

married filing separately); and

· Interest paid on acquisition debt incurred on or before December 15, 2017 is limited to

interest paid on acquisition indebtedness of $1,000,000 or less ($500,000 or less if married

filing separately).

Casualty Loss Deduction

The tax treatment of personal casualty losses and thefts is changed under the TCJA. Pursuant to the

TCJA, the itemized deduction for personal casualty and theft losses is temporarily limited in tax years

2018 through 2025 solely to losses attributable to federally-declared disasters.

In addition, casualty loss rules are revised for net disaster losses occurring in 2016 and 2017. Under

the revision, the limitation applicable to each casualty is increased from the previous $100 to $500 for

an individual who has a net disaster loss for tax years beginning in 2016 or 2017. However, the 10%

of AGI limitation for such taxpayers is waived.

A federally–declared disaster means any disaster that is subsequently determined by the president of

the United States to warrant assistance by the federal government under the Robert T. Stafford

Disaster Relief and Emergency Assistance Act.

Special Rules for Qualified Disaster-Related Personal Casualty Losses

In recognition of the taxpayers who recently experienced qualified disaster-related casualty losses but

who do not itemize deductions, the Taxpayer Certainty and Disaster Tax Relief Act part of the

Consolidated Appropriations Act, 2021 authorizes an increase of the standard deduction for such

taxpayers equal to the taxpayer’s net disaster loss. The “net disaster loss,” for purposes of the

standard deduction increase, means the excess of qualified disaster-related personal casualty losses

over personal casualty gains.

A personal casualty gain is the recognized gain from any involuntary conversion of property. For

example, such a gain could occur if a homeowner whose residence, insured for $300,000 but valued

for tax purposes at $250,000, was destroyed. If the homeowner received $300,000 in insurance

proceeds, he or she would have experienced a personal casualty gain of $50,000 ($300,000 -

$250,000 = $50,000). The gain experienced would constitute taxable income and would reduce the

net disaster loss.

If the taxpayer in the example was married and filed a federal income tax return as married filing

jointly, the taxpayer’s 2021 standard deduction (which would normally be $25,100) is increased by

the amount of the net disaster loss from $25,100 to $75,100 ($25,100 + $50,000 = $75,100).

Although the $100 floor on the casualty claim is increased to $500, the requirement that only the

amount of the claimed loss that exceeds 10% of the taxpayer’s adjusted gross income is eliminated.

I would like to summarize several of the changes this year.

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Get ready for taxes: What's new and what to consider when filing.

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