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IRS Increases Mileage Rate to 58.5 Cents!
If you deduct the cost of operating your car from your taxes, then the IRS is offering good news. Following increasing gas prices and other operating costs, the IRS has raised the optional deductible rate — the amount per business mile traveled that you can deduct in lieu of tracking your actual operating costs — 8 cents to a total of 58.5 cents per mile.
This rate will be in effect for all business miles traveled from July 1, 2008 through December 31, 2008. Other mileage rates have increased as well. Here’s the full chart:
| Purpose | Rates 1/1 through 6/30/08 | Rates 7/1 through 12/31/08 |
| Business | 50.5 | 58.5 |
| Medical/Moving | 19 | 27 |
| Charitable | 14 | 14 |
There’s more good news. Many companies use the IRS’s deduction rate for determining how much to reimburse employees for business-related travel. If you expect to be traveling for your employer in the second half of this year, you’ll be able to reclaim more of your travel expenses.
Alternative Minimum Tax
What is the Alternative Minimum Tax (AMT)? The AMT came into being with the Tax Reform Act of 1969. Its purpose was to target a small number of high-income taxpayers who could claim so many deductions they owed little or no income tax. A growing number of middle-income taxpayers are discovering they are subject to the AMT.
The tax laws give preferential treatment to certain kinds of income and allow special deductions and credits for certain kinds of expenses. The alternative minimum tax (AMT) attempts to ensure that anyone who benefits from these tax advantages pays at least a minimum amount of tax.
The AMT is a separately figured tax that eliminates many deductions and credits, thus increasing tax liability for an individual who would otherwise pay less tax. The tentative minimum tax rates on ordinary income are percentages set by law. For capital gains and certain dividends, the rates in effect for the regular tax are used.