The House Ways and Means Committee recently offered a window into what the legislative body is working on when it comes to developing legislation to govern the taxation of digital assets, highlighting six bills and a discussion draft covering a range of topics.

The House Ways and Means Committee recently offered a window into what the legislative body is working on when it comes to developing legislation to govern the taxation of digital assets, highlighting six bills and a discussion draft covering a range of topics.

As part of the development, the committee held a June 9, 2026, hearing to solicit commentary from industry on the bills, during which committee Chairman Jason Smith (R-Mo.) called the “digital asset status quo is untenable. America needs clear tax rules of the road to remain the crypto capital of the world.”

Smith stated that cryptocurrency has “a market capitalization of over $2 trillion. That’s a massive industry by any measure, and nearly all other industries of a similar size enjoy clear tax policies.”

Chairman Smith noted that more and more people own cryptocurrency and “nearly a quarter of cryptocurrency holders earn less than $75,000 and the average crypto holder is nearly as likely to work in construction, manufacturing, or food service as tech or finance.”

The bills and discussion draft include:

• The Applying Existing Tax Anti-Abuse Rules to Digital Assets Act (H.R. 9172)
• The Charitable Deductions for Digital Donations Act (H.R. 9173)
• The Digital Assets Voluntary Disclosure Program Act (H.R. 9174)
• The Tax Clarity for Mining and Staking Act (H.R. 9175)
• The Providing Analogous Rules for Digital Assets Act (H.R. 9176)
• The Less Tax Paperwork for Digital Asset Owners Act (H.R. 9178)
• The End Digital Assets Tax Shelters Act (Discussion Draft)

The proposed legislation address “three key gaps in the current tax regime that make it harder for Americans to fully participate in the digital asset ecosystem,”

First, he said, “common digital transactions like mining and staking do not fit clearly into existing tax law. In other places, the tax code is silent as to the treatment of digital assets. The ambiguity creates an opening for taxpayers to exploit the law and avoid paying taxes in some circumstances and creates unfair tax burdens on others.

Second, Smith stated that “digital assets do not receive the tax benefit nor the protection from anti-abuse rules long granted to traditional financial assets. The imbalance between digital assets and traditional financial assets creates a two-tier system that unintentionally favor certain assets over others.”

Third, “crypto owners face burdensome tax compliance that makes using digital assets in ordinary commerce almost impossible.” Smith noted that “31 percent of crypto owners would like to buy a cup of coffee at the local shop, yet each $5 cup of coffee bought with a digital asset generates two new pieces of tax paperwork,” which adds a significant burden to both the IRS and the taxpayer.

Ranking Member Richard Neal (R-Mass.) had mixed reviews on the bills. He described his initial observation as some of the bills being “quite sensible, providing clear rules of the road for taxpayers looking to comply with the law. Other provisions sought the common sense goal of alleviating burdensome paperwork requirements, especially in situations where it’s highly unlikely that there would be any tax associated with those transactions, and indeed there are provisions that would close loopholes that are specific to the digital asset industry.”

However, Neal also noted that “it appears there are some provisions that deviate substantially from general tax principles, providing a distinct advantage that are beyond some other investments. We want to be careful about putting a thumb on the scale, and as we all know, it’s much easier to put something into the tax code than it is to take it out.”

Lawrence Zlatkin, Coinbase vice president of tax, testified during the hearing that the bills “represent the most comprehensive effort to modernize digital asset taxation that we have seen to date. Most importantly, this legislation recognized a fundamental reality: market structure and tax policy go hand-in-hand.”

In particular, Zlatkin highlighted H.R. 9178, which he testified “is an important step forward towards making stablecoin payments practical while reducing unnecessary reporting noise,” as well as H.R. 9173, which “provides long-needed clarity for mining and staking rewards, helping ensure taxpayers are not forced into tax obligations before they’ve generated liquidity though an actual sale.”

Mike Kaercher, deputy director of the Tax Law Center at New York University, cautioned that as the bills move through the process, “I encourage policymakers to consider three tax policy principles most closely: parity, administrability, and guardrails to prevent abuse. Some of the provisions in these bills would make improvements consistent with these principles.”

Among those, Kaercher testified that for example, “one of the bills would extend anti-abuse regimes, like wash sale rules and constructive sale rules, to digital assets. That’s a good idea. Another example is the de minimis provision on qualifying stablecoins – a targeted approach with guardrails can reduce paperwork and compliance burdens without creating substantial hidden tax subsidies for digital assets, but the rule should remain targeted because a broader de minimis provision risks abuse and would favor investments in digital assets over those in traditional finance.”

On the provision of deferring tax on mining and staking rewards, Kaercher testified that deferral “isn’t just the distortive subsidy, it could also undermine administrability. Deferral increases complexity for taxpayers and makes it harder for the IRS to do its job.”

He also warned about the possibility of government bailouts if guardrails and policy are not correctly developed.

“I think one thing for policymakers to consider on this is that if digital assets become a larger part of retirement accounts and the assets remain highly volatile, or in a worst-case scenario, crash, that would have an enormous impact on households’ retirement savings, and if that were to happen, I think policymakers would have to think about whether to respond with something like a bailout.”

The Treasury Department, Department of Labor, and Department of Health and Human Services finalized regulations implementing the independent dispute resolution (IDR) process established under the No Surprises Act (P.L. 116-260). The regulations provide new disclosure and administration requirements for group health plans and health insurance issuers related to surprise billing protections. Although the final rules are generally effective August 3, 2026, several provisions have delayed applicability dates.

The Treasury Department, Department of Labor, and Department of Health and Human Services finalized regulations implementing the independent dispute resolution (IDR) process established under the No Surprises Act (P.L. 116-260). The regulations provide new disclosure and administration requirements for group health plans and health insurance issuers related to surprise billing protections. Although the final rules are generally effective August 3, 2026, several provisions have delayed applicability dates.

The final rules require plans and issuers to use claim adjustment reason codes (CARCs) and remittance advice remark codes (RARCs), as specified in guidance, when providing any paper or electronic remittance advice to an entity that does not have a contractual relationship with the plan or issuer. These disclosures must be included along with the initial payment or notice of denial of payment for certain items and services subject to the surprise billing protections in the No Surprises Act.

The regulations also make several procedural updates to the federal IDR process. These include refinements to the open negotiation period, the formal initiation of the IDR process, and the dispute eligibility review procedures. Further, the rules address the payment and collection of administrative fees as well as certified IDR entity fees.

The agencies also finalized the definition of bundled payment arrangements, amended requirements related to batched items and services, and amended the rules for extensions of timeframes due to extenuating circumstances. Additionally, the regulation finalizes provisions that require plans and issuers to register in the federal IDR portal.

T.D. 10049

The IRS has published the inflation adjustment factor and reference prices for determining the credit for renewable electricity production for calendar year 2026 sales of kilowatt hours of electricity produced in the U.S. or a U.S. possession from qualified energy resources.

The IRS has published the inflation adjustment factor and reference prices for determining the credit for renewable electricity production for calendar year 2026 sales of kilowatt hours of electricity produced in the U.S. or a U.S. possession from qualified energy resources.

The inflation adjustment factor for qualified energy resources is 2.0570. The reference price for facilities producing electricity from wind is 3.17 cents per kilowatt hour. The reference prices for facilities producing electricity from closed-loop biomass, open-loop biomass, geothermal energy, solar energy, municipal solid waste, qualified hydropower production and marine and hydrokinetic renewable energy have not been determined for calendar year 2026.

Phaseout Limits

For electricity sold during the calendar year 2026, the renewable electricity production credit is not subject to a phaseout under Code Sec. 45(b)(1) for electricity produced from wind. This is because the 2026 reference price for electricity produced from wind, 3.17 cents per kilowatt hour, does not exceed 8 cents multiplied by the inflation adjustment factor (2.0570). The phase-out of the credit also does not apply to electricity sold in 2026 and produced from closed-loop biomass, open-loop biomass, geothermal energy, solar energy, municipal solid waste, qualified hydropower production and marine and hydrokinetic renewable energy.

Credit Amount Adjustments

The credit for renewable electricity production for calendar year 2026 under Code Sec. 45(a) is 3.1 cents per kilowatt hour on the sale of electricity produced from the qualified energy resources of wind, closed-loop biomass and geothermal energy. The credit is 1.5 cents per kilowatt hour on the sale of electricity produced in open-loop biomass facilities, landfill gas facilities, trash facilities, qualified hydropower facilities and marine and hydrokinetic renewable energy facilities.

Notice 2026-37

The IRS updated guidance relating to the energy community provisions in:

• Code Sec. 45 production tax credit for electricity produced from certain resources;
• — the resource-neutral Code Sec. 45Y clean electricity production credit that largely replaces the Code Sec. 45 credit for property placed in service after 2024;
• — the Code Sec. 48 business energy investment credit for investments in property that produces electricity from certain resources; and
• — the resource-neutral Code Sec. 48E clean energy investment credit that largely replaces the Code Sec. 48 credit for property placed in service after 2024.

The IRS updated guidance relating to the energy community provisions in:

• — the Code Sec. 45 production tax credit for electricity produced from certain resources;
• — the resource-neutral Code Sec. 45Y clean electricity production credit that largely replaces the Code Sec. 45 credit for property placed in service after 2024;
• — the Code Sec. 48 business energy investment credit for investments in property that produces electricity from certain resources; and
• — the resource-neutral Code Sec. 48E clean energy investment credit that largely replaces the Code Sec. 48 credit for property placed in service after 2024.

Annual Statistical Area Category and Coal Closure Category Update

Notice 2026-39 publishes information taxpayers may use to determine whether they meet certain requirements under the Statistical Area Category or the Coal Closure Category for purposes of qualifying for energy community bonus credit amounts or rates.

• (1) Appendix 1 lists counties and county-equivalents that qualify as energy communities because they meet the Fossil Fuel Employment threshold and the unemployment rate requirement for calendar year 2025.
• (2) Appendix 2 lists newly identified census tracts with either a coal mine closure or a coal-fired electric generating unit retirement, and census tracts directly adjoining those tracts.
• (3) Appendix 3 lists census tracts that newly qualify as coal closure census tracts because of location-data corrections issued since the publication of Notice 2025-31.

Notice 2026-39

The Treasury Department and the IRS have announced plans to issue proposed regulations under Code Sec. 4960 expanding the definition of a covered employee for purposes of the excise tax on excessive compensation paid by applicable tax-exempt organizations (ATEOs). The guidance follows amendments made by section 70416 of the One, Big, Beautiful Bill Act and applies to taxable years beginning after December 31, 2025.

The Treasury Department and the IRS have announced plans to issue proposed regulations under Code Sec. 4960 expanding the definition of a covered employee for purposes of the excise tax on excessive compensation paid by applicable tax-exempt organizations (ATEOs). The guidance follows amendments made by section 70416 of the One, Big, Beautiful Bill Act and applies to taxable years beginning after December 31, 2025.

Before the legislative change, a covered employee generally was one of an ATEO’s five highest-compensated employees for the tax year at issue or an individual who previously held that status. The amended law broadens the definition to include any employee of an ATEO and certain former employees for taxable years beginning after 2025. However, individuals who were not covered employees under the pre-2026 rules will not become covered employees solely because they worked for an ATEO before 2026.

The forthcoming regulations are expected to eliminate references to the five highest-compensated employees standard and make conforming changes. The agencies intend to retain exceptions similar to the current limited-hours and non-exempt funds exceptions, but discontinue the limited-services exception because its rationale no longer applies. Until proposed regulations are issued, ATEOs may rely on Notice 2026-36. The Treasury Department and the IRS requested comments on the proposed rules by August 4, 2026.

Notice 2026-36

IR 2026-73

The IRS has issued the 2025 Data Book detailing the agency’s activities during fiscal year 2025. The report provided an overview of the agency’s operations to meet statutory responsibilities. The revenue collected by the Service exceeded $5.3 trillion.

The IRS has issued the 2025 Data Book detailing the agency’s activities during fiscal year 2025. The report provided an overview of the agency’s operations to meet statutory responsibilities. The revenue collected by the Service exceeded $5.3 trillion.

“Fiscal Year 2025 was a pivotal year, as we began the process of implementing tax relief for hardworking Americans enacted as part of the Working Families Tax Cuts Act (WFTC),” said IRS CEO Frank J. Bisignano. “The numbers in the Data Book tell the story of an organization that serves as a key partner in the administration’s mission,” he added. The CEO also highlighted efforts to transform the IRS into a digital-first agency. These efforts would reduce paper processing through the “zero paper” initiative.

During the 2026 filing season, around 45 percent of individual tax returns claimed one or more of the new tax benefits from the WFTC. The average refund on a return claiming one of these deductions was over $3,200, as of May 27.

Further, online tools, including the IRS Online Account were upgraded to expand access and add new features. Expanded technology and advanced analytics would allow the Service to identify high-risk areas of non-compliance and tax fraud. Finally, more information can be found here.

IR 2026-74

The IRS announced the release of a new calculator to determine interest rates for large, multi-year construction and manufacturing projects. The calculator is named Percentage-of-Completion Method (PCM) Look-Back Interest Calculator and is MS Excel based. It supports calculations for Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts. However, it does not address all fact patterns or complexities associated with look-back interest calculations.

The IRS announced the release of a new calculator to determine interest rates for large, multi-year construction and manufacturing projects. The calculator is named Percentage-of-Completion Method (PCM) Look-Back Interest Calculator and is MS Excel based. It supports calculations for Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts. However, it does not address all fact patterns or complexities associated with look-back interest calculations.

“The IRS is focused on improving and enhancing how we serve taxpayers,” said IRS Chief Executive Officer Frank J. Bisignano. “We are transforming the IRS into a digital-first agency that provides the best possible experience for taxpayers, and tools like this calculator are an important step in that effort,” he added.

The look-back interest is determined using a three-step process:

• Hypothetically reallocating income to prior tax year based on actual revenues and costs;
• Computing hypothetical tax overpayments or underpayments of tax; and
• Calculating interest on tax underpayments or overpayments.

Taxpayers and tax practitioners may submit feedback about the calculator, by emailing Stakeholder Liaison and including "Look-Back Interest Workbook Feedback" in the subject line. More information can be found here.

IR 2026-70

Nonbusiness creditors may deduct bad debts when they become totally worthless (i.e. there is no chance of its repayment). The proper year for the deduction can generally be established by showing that an insolvent debtor has not timely serviced a debt and has either refused to pay any part of the debt in the future, gone through bankruptcy, or disappeared. Thus, if you have loaned money to a friend or family member that you are unable to collect, you may have a bad debt that is deductible on your personal income tax return.

The fact that the debtor is a family member or other related interest does not preclude you from taking a bad debt deduction, provided that the debt was bona fide and that worthlessness has been established. A direct or indirect transfer of money between family members may create a bona fide debt eligible for the bad debt deduction. However, these transactions are closely scrutinized to determine whether the transfer is a bona fide debt or a gift.

Bona-fide debt and other requirements for deductibility

You may only take a bad debt deduction for bona-fide debts. A bona-fide debt is a debt arising from a debtor-creditor relationship based on a valid and enforceable obligation to repay a fixed or determinable sum of money. You must also have the present intention to seek repayment of the debt. Additionally, for a bad debt you must also show that you had the intent to make a loan, and not a gift, at the time the money was transferred. Thus, there must be a true creditor-debtor relationship.

Moreover, nonbusiness bad debts are only deductible in the year they become totally worthless (partially worthless nonbusiness bad debts are not deductible).

To deduct a bad debt, you must also have a basis in it, which means that you must have already included the amount in your income or loaned out your cash (for example, if your spouse has not paid court-ordered child support, you can not claim a bad debt deduction for the amount owed as this amount was not previously included in your gross income).

Reporting bad debts

You can deduct nonbusiness bad debts as short-term capital losses on Schedule D of your Form 1040. On Schedule D, Part I, Line 1, enter the debtor's name and "statement attached" in column (a). Enter the amount of the bad debt in parentheses in column (f). If you are reporting multiple bad debts, use a separate line for each bad debt. For each bad debt, attach a statement to your return containing the following:

•  A description of the debt, including the amount and date it became due;
• The name of the debtor, and any business or family relationship between you and the debtor:
• The efforts you made to collect the debt; and
• An explanation of why you decided the debt was worthless (for example, you can show the debtor has declared bankruptcy or is insolvent, or that collection efforts such as through legal action will not likely result in the debt being paid).

If you did not deduct a bad debt on your original income tax return for the year it became worthless, you can file a refund claim or a claim for a credit due to the bad debt. You must use Form 1040X to amend your return for the year the debt became worthless. It must be filed with 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later.

Note. If you deduct a bad debt and in a later year collect all or part of the money owed, you may have to include this amount in your gross income. However, you can exclude from your gross income the amount recovered up to the amount of the deduction that did not reduce your tax in the year you deducted the debt.

Individuals with $400 or more of net earnings from self-employment must pay self-employment tax, in addition to any income tax imposed on the same income. This article can help you estimate any self-employment tax liability that you may owe for 2008.

Self-employment tax

The self-employment tax consists of two taxes: a tax used to fund Social Security benefits and a tax used to fund Medicare benefits. The Social Security tax rate is 12.4 percent, and the Medicare tax rate is 2.9 percent. The combined tax rate is 15.3 percent.

The first $102,000 (for 2008) of net income from self-employment (reduced by any wages received by the individual) is subject to a 15.3 percent tax (which includes the Social Security and Medicare health insurance taxes). Income above that amount is only subject to a 2.9 percent Medicare tax. Taxpayers use Schedule C or C-EZ (Form 1040) to figure net earnings from self-employment (self-employment income). Schedule SE (Form 1040) is used to figure and report self-employment taxes.

Calculating self-employment tax liability

Step1. Determine your net income from self-employment (from Schedule C or C-EZ for sole proprietors; from Schedule E for self-employed businesses treated as a partnership; or Schedule F for farmers). Generally, net income is your total business receipts minus your total business deductions.

Step 2. Multiply your net income from self-employment by 0.9235 (or 92.35 percent). This is your net earnings from self-employment (self-employment income). If this number is less than $400, you do not owe self-employment tax.

Step 3. Multiply by 0.153 (or 15.3 percent) the amount of your net earnings up to an amount equal to $102,000 reduced by any wages received (for which there has already been withholding). Additionally, if applicable, multiply any net earnings over $102,000 by 0.029 (or 2.9 percent). Add these two numbers together. This is your estimated self-employment tax liability.

Step 4. Report your self-employment tax liability on Schedule SE of Form 1040.

Example. Your Schedule C shows net business income of $225,000. Your net earnings from self-employment (self-employment income) is $207,787.50 ($225,000 x 0.9235 = $207,787.50). The first $102,000 (assuming no wage income) gets taxed at a maximum rate of 15.3 percent ($102,000 x .153 = $15,606). The remaining $105,787.50 is taxed at 2.9 percent ($105,787.50 x .029 percent = $3,067.84). Your total self-employment tax liability is an estimated $18,673.84 ($15,606 + $3,067.84= $18,673.84).

Move over hybrids - buyers of Volkswagen and Mercedes diesel vehicles now qualify for the valuable alternative motor vehicle tax credit. Previously, the credit had gone only to hybrid vehicles. Now, the IRS has qualified certain VW and Mercedes diesels as "clean" as a hybrid.

Qualifying vehicles

The IRS has designated the following diesel-powered vehicles as advanced lean-burning technology motor vehicles that qualify for the alternative motor vehicle tax credit:

• The 2009 VW Jetta TDI sedan and TDI sportwagen models; and
• The 2009 Mercedes-Benz GL320, R320 and ML320 Bluetec models.

 The credit amounts vary depending on the vehicle's fuel economy. The credit amounts for each vehicle are as follows:

• 2009 VW Jetta TDI sedan and TDI sportwagen: $1,300 credit;
• 2009 Mercedes ML320 Bluetec: $900;
• 2009 Mercedes R320 Bluetec: $1,550; and
• 2009 GL320 Bluetec: $1,800.

VW's diesels went on sale in August, while the Mercedes Bluetec models are expected to go on sale beginning this October.

The alternative motor vehicle tax credit, generally

The alternative motor vehicle tax credit is a lucrative tax credit for purchasers of qualifying automobiles. But, just as the situation is with hybrids, the full amount of the credit for each vehicle is available only during a limited period. The dollar value of the tax credit will begin to be reduced once the manufacturer sells 60,000 vehicles that qualify for the tax credit. Additionally, the credit is available only to the original purchaser of a new, qualifying vehicle. As such individuals who lease the vehicle are not eligible for the credit - the credit is allowed only to the vehicle's owner, such as the leasing company.

Taxpayers may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th advance lean burn technology motor vehicle or hybrid passenger automobile or light truck. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.

The credit - as Congress has allotted so far - may only be taken for qualified vehicles purchased before the end of 2010.

The Housing Assistance Tax Act of 2008 (2008 Housing Act) gave a boost to individuals purchasing a home for the first time with a $7,500 first-time homebuyer tax credit. The credit was enhanced from $7,500 to $8,000 and extended for certain purchases under the American Recovery and Reinvestment Act of 2009 (2009 Recovery Act). This article explains how to determine the credit for eligible first-time homebuyers.

The $7,500 credit

The first-time homebuyer tax credit is a refundable, but temporary, tax credit equal to 10 percent of the purchase price of the residence, up to $7,500 for single individuals and married couples filing jointly, and $3,750 for married individuals who file separately. The $7,500 credit is only available for first-time purchases of primary residences (i.e. no second homes) made on or after April 9, 2008 and before July 1, 2009. To be eligible to claim the credit, however, an individual (or his or her spouse) must not have had any type of ownership interest in a principal residence during the three-year period before the date that the principal residence, for which the credit is to be taken, is purchased. You can claim a credit of up to either $7,500, or 10 percent of the purchase price, whichever is less.

The $8,000 credit under the 2009 Recovery Act

The 2009 Recovery Act raised the $7,500 maximum credit to $8,000, and extended that level through 2009 for eligible home purchases. The new law also eliminates any required repayment to the IRS after 36 months in the home. However, the enhanced $8,000 credit only applies to purchase of a principal residence made by a "first-time" homebuyer after December 31, 2008. Purchases on or after April 9, 2008 and before January 1, 2009 continue to be governed by the original first-time homebuyer credit enacted in the 2008 Housing Act.

The credit must be repaid in equal installments over the course of 15 years; the credit is interest-free. Repayments start two years after the year in which the residence is purchased. If the taxpayer sells or no longer uses the home as his or her principal residence before repaying the credit, the unpaid amount accelerates and becomes due on the return for the year in which the residence is sold or no longer used as a principal residence. The credit does not need to be repaid if the taxpayer dies. Special rules also exist for an involuntary conversion and a residence transferred in a divorce.

Example. Jim and Marsha, a married couple, are new homebuyers. They have never owned any other real property as a primary residence. Their combined modified adjusted gross income (AGI) is $74,600. They purchase their home in June 2009. Their first-time home purchase qualifies for the full $7,500 credit. They may file an amended 2008 return to claim the credit. Repayments of the $7,500 credit would begin in 2011.

Example. Mary and Tim are married joint filers who close title on a new home in February 2009. Their combined modified AGI is $100,000. They are entitled to claim the $8,000 first-time homebuyer tax credit. If they remain in the home for 36 months, they are not required to repay the credit to the government.

Phase-outs

The $7,500 and $8,000 credits both begin to phase-out for married couples with modified AGI between $150,000 and $170,000, and for single taxpayers with modified AGI between $75,000 and $95,000. However, the new credit benefits more than just single individuals and married couples, and can be taken by all co-owners, such as same-sex couples and family members who buy the residence together. However, the total amount of the credit allowed to such individuals, jointly, cannot exceed $7,500 (or $8,000).

Figuring the credit

If your modified AGI exceeds income threshold at which the credit begins to phase-out - $75,000 for single filers and $150,000 for joint filers - use the following steps to help determine the amount of the credit you can take.

1. Subtract the "phase-out amount" ($75,000 for single filers, or $150,000 for joint filers) from your (or you and your spouse's) modified AGI.
2. Take this dollar amount and divide it by $20,000.
3. Multiply this number by $7,500 (for single and joint filers), $3,750 for a married individual filing separately, or 10 percent of the purchase price of your home, whichever amount is applicable in your circumstances. (For example, if the purchase price of your home is $50,000, you would be able to claim the credit up to $5,000, since 10 percent of $50,000 (the purchase price) is less than $7,500). The resulting amount is the total amount of the credit that you may claim.

Note. This same formula will work for determining the $8,000 credit under the 2009 Recovery Act. Simply substitute $8,000 for $7,500 where applicable.

 Example. Jane, a single filer, is a first-time homebuyer. Her modified AGI is $80,000. She buys a home in October 2008 for $200,000. Because 10 percent of the purchase price ($20,000) is more than $7,500, the maximum credit amount she can claim is $7,500. However, because her modified AGI exceeds $75,000, she will not be able to claim the entire credit amount. Instead, she will be able to claim a credit of $5,625 ($80,000 - $75,000 = $5,000. $5,000 divided by $20,000 = .25. $7,500 multiplied by .25 = $1,875. $7,500 - $1,875 = $5,625).

Example. Michael is a single filer and first-time homebuyer. His modified AGI is $87,600. He buys a home in September 2008 for $50,000. Because 10 percent of the home's purchase price ($5,000) is less than the maximum amount of the allowable credit ($7,500), the maximum credit he can claim is $5,000. However, because his modified AGI exceeds the amount at which the credit phases out, his credit will be further reduced. Michael can claim a credit of $1,850 ($87,600-$75,000= $12,600. $12,600 divided by $20,000 = .63. $5,000 multiplied by .63 = $3,150. $5,000 - $3150 = $1,850.

Example. Linda and Ed, married joint filers, are first-time homebuyers. Their modified AGI is $162,400. They buy their first home in August 2008 for $300,000. Since their modified AGI exceeds the phase-out amount ($150,000 for joint filers), they will not be able to claim the entire credit amount of $7,500. Instead, they will be able to claim a maximum credit of $2,850 ($162,400 - $150,000 = $12,400. $12,400 divided by $20,000 = .62. $7,500 multiplied by .62 = $4,650. $7,500 - $4,650 = $2,850).

The credit amounts in every case will need to be repaid beginning two years after the date the home is purchased, in equal installments over the course of 15 years.

If you or anyone close to you is considering purchasing a first home as defined under the new law, the new tax credit may be able to make an otherwise difficult down payment sail through. Please contact this office for further details.

The IRS allows taxpayers with a charitable inclination to take a deduction for a wide range of donated items. However, the IRS does provide specific guidelines for those taxpayers contributing non-cash items, from the type of charity you can donate to in order to take a deduction to the quality of the goods you contribute and how to value them for deduction purposes. If your summer cleaning has led, or may lead, you to set aside clothes and other items for charity, and you would like to know how to value these items for tax purposes, read on.

Household items that can be donated to charitable, and for which a deduction is allowed, include:

• Furniture;
• Furnishings;
• Electronics;
• Appliances;
• Linens; and
• Similar items.

The following are not considered household items for charitable deduction purposes:

• Food;
• Paintings, antiques, and other art objects;
• Jewelry; and
• Collections.

Valuing clothing and household items

Many people give clothing, household goods and other items they no longer need to charity. If you contribute property to a qualified organization, the amount of your charitable contribution is generally the fair market value (FMV) of the property at the time of the contribution. However, if the property has increased in value since you purchased it, you may have to make some adjustments to the amount of your deduction.

You can not deduct donations of used clothing and used household goods unless you can prove the items are in "good," or better, condition; and in the case of equipment, working. However, the IRS has not specifically set out what qualifies as "good" condition.

Fair market value is the amount that the item could be sold for now; what you originally paid for the clothing or household item is completely irrelevant. For example, if you paid $500 for a sofa that would only get you $50 at a yard sale, your deduction for charitable donation purposes is $50 (the sofa's current FMV). You cannot claim a deduction for the difference in the price you paid for the item and its current FMV.

To determine the FMV of used clothing, you should generally claim as the value the price that a buyer of used clothes would pay at a thrift shop or consignment store.

Comment. In the rare event that the household item (or items) you are donating to charity has actually increased in value, you will need to make adjustments to the value of the item in order to calculate the correct deductible amount. You may have to reduce the FMV of the item by the amount of appreciation (increase in value) when calculating your deduction.

Good faith estimate

All non-cash donations require a receipt from the charitable organization to which they are donated, and it is your responsibility as the taxpayer, not the charity's, to make a good faith estimate of the item's (or items') FMV at the time of donation. The emphasis on valuation should be on "good faith." The IRS recognizes some abuse in this area, yet needs to balance its public ire with its duty to encourage legitimate donations. While the audit rate on charitable deductions is not high, it also is not non-existent. You must be prepared with reasonable estimates for used clothing and household goods, high enough so as not to shortchange yourself, yet low enough to prevent an IRS auditor from threatening a penalty.

In any event, if the FMV of any item is more than $5,000, you will need to obtain an appraisal by a qualified appraiser to accompany your tax form (which is Form 8283, Noncash Charitable Contributions). When dealing with valuables, an appraisal helps protect you as well as the IRS.

If you have questions about the types of items that you can donate to charity, limits on deductibility, or other general inquiries about charitable donations and deductions, please contact out office.

In response to the record high gas prices, the IRS has raised the business standard mileage reimbursement rate from 50.5 cents-per-mile to 58.5 cents-per-mile. This new rate is effective for business travel beginning July 1, 2008 through December 31, 2008. While the increase is much needed, businesses should evaluate whether the IRS has done enough, or whether a switch to the actual expense method of calculating vehicle expense deductions may make more sense for 2008.

Comment. Not only did the IRS raise the standard business mileage reimbursement rate eight cents, to 58.5 cents-per-mile, it also increased the standard mileage rate for medical and moving expenses from 19 cents-per-mile to 27 cents-per-mile. These new rates are also effective July 1, 2008 through December 31, 2008. The charitable standard mileage rate remains at 14 cents, since it is fixed by the Tax Code.

Two reimbursement methods

There are two basic methods that business taxpayers may choose to compute their deduction for the business use of automobiles (including vans and light trucks): the IRS's standard mileage rate (SMR) and the actual expense method. The method a business chooses in the first year the vehicle is placed in service is important, as it affects whether a change in method can be made in later years.

Taxpayers may use the higher rate for business use of an automobile for the period starting July 1, 2008 through December 31, 2008. Travel before July 1 must be computed using the previous rate of 50.5 cents-per-mile. A business cannot split use of the actual method for one period and the standard mileage rate for the other - it is either one or the other for the entire 2008 tax year (The same rules apply to the medical and moving mileage rates of 19 cents for expenses before July 1 and 27 cents for the remainder of the year).

Standard mileage rate

Under the SMR method, the fixed and operating costs of the vehicle are generally calculated by multiplying the number of business miles traveled during the year by the business standard mileage rate (for example, 58.5 cents-per-mile for July 1, 2008 through December 31, 2008).  Although a business using the SMR method cannot deduct any of the actual expenses incurred for operating or maintaining the car, the IRS does allow additional deductions for business-related parking costs and tolls, as well as interest paid on vehicle loans and any state or local personal property tax paid on the vehicle.

Actual expense method

Under the actual expense method, taxpayers can deduct the operating and maintenance costs incurred for the car during the current year, which include:

• Gas and oil;
• License and registration fees;
• Insurance;
• Garage rent;
• Tires;
• Minor and major repairs;
• Maintenance items such as oil changes and tire rotations;
• Interest paid on a car or truck loan; and
• Car washes and detailing.

If the business use of the vehicle is less than 100 percent, expenses need to be allocated between business and personal use. For example, if based on the taxpayer's records, the total actual vehicle expenses for 2008 are $3,000, and the vehicle is only used 60 percent for business, the allowable deduction under the actual expense method is $1,800 ($3,000 x .60).

Switching methods

Once actual depreciation in excess of straight-line has been claimed on a vehicle, the SMR cannot be used. Absent this prohibition (which usually is triggered if depreciation is taken), a business can switch from the SMR method to the actual expense method from year to year. Businesses cannot, however, make mid-year method changes either to, or from, one method to the other. Additionally, if a taxpayer uses the actual expense method for the first year that a vehicle is placed in service, it cannot switch to the SMR method for that vehicle in later years. The actual expense method must always be used for that vehicle.

Comment. While a change cannot be made effective at mid-year, a business is free to decide at any time to switch from the SMR to the actual expense method for the entire year, as long as the decision is made before the time at which the federal income tax return is filed. That is, a taxpayer cannot use the SMR for part of the year and then use the actual expense method for the remainder of the year. If the actual expense method is used, only those expenses that are properly substantiated are allowed.

Example. Toy Store, Inc. has been using the SMR since its van was new back in 2006. With $90 fill-ups every other day, Toy Store is figuring that it might do better keeping tabs on how much it spends for gas, especially since it had a $2,500 transmission repair this year as well.

As long as Toy Store has records (e.g., credit card receipts and repair bills), it can decide on either the actual expense method or the SMR right up until it files its return for 2008.

For leased vehicles, the rule is even more stringent. A taxpayer who uses the SMR method for the first year the car is placed in service in the business must use the SMR for the entire lease period.

SMR and depreciation limits

The SMR method includes an amount for depreciation, measured by the cost of the vehicle and limited by the luxury depreciation limits. A taxpayer who changes from the SMR method to the actual cost method in a later year, and before the car has been fully depreciated, must use straight-line depreciation for the car's estimated remaining useful life. Therefore, taxpayers cannot claim an additional accelerated deduction for depreciation when using the SMR method. Based on statutory language, whether intended or not, bonus depreciation may not be claimed if the SMR is taken. Election of the standard mileage rate is considered an election out of MACRS.

Bonus depreciation

The 2008 Economic Stimulus Act also reprised bonus depreciation that was used to accelerate economic recovery after 9-11 and Hurricane Katrina. Under the new law, qualifying businesses can take 50-percent first-year bonus depreciation of the adjusted basis of qualifying property. The original use of the property must begin with the taxpayer and occur during the 2008 year. The taxpayer must place transportation property in service before December 31, 2009.

To reflect bonus depreciation as it applied specifically to passenger vehicles, the new law raised the Code Sec. 280F cap on "luxury" automobile depreciation to $8,000 if bonus depreciation is claimed for a qualifying taxpayer (for a maximum first-year depreciation of no more than $10,960 and $11,160 for vans and light trucks).

For passenger automobiles first placed in service in 2008 and to which the 50-percent additional first-year depreciation deduction does not apply, the depreciation deduction limitations for the first three tax years are $2,960, $4,800, and $2,850, respectively, and $1,775 for each succeeding year. For trucks and vans first placed in service in 2008 and to which the 50-percent additional first-year depreciation deduction does not apply, the depreciation deduction limitations for the first three years are $3,160, $5,100, and $3,050, respectively, and $1,875 for each succeeding year.

Documentation and substantiation

The types of records required to substantiate expenses associated with the business use of an automobile depend on whether the SMR or actual expense method is used. In general, adequate substantiation for deduction purposes (for both SMR and actual expense method taxpayers) require that the following be recorded:

• The amount of use (i.e. the number of miles driven for business, and even personal, use);
• The date of the expenditure or use; and
• The business purpose of the expenditure or use.

Taxpayers using the SMR should maintain a daily log book or "diary" that substantiates miles driven, the dates of the vehicle's use, the destination, and the business purposes of the trip. For taxpayers who deduct the actual expenses associated with the business use of an automobile, substantiating costs will be more complicated and time-consuming. A mileage log is a necessity, as it should thoroughly account for miles driven (bifurcating both business and personal use). Taxpayers should also keep receipts, copies of cancelled checks, bills paid, and any other documentation showing costs incurred and expenditures made. For depreciation purposes, taxpayers also need to document the original cost of the vehicle and any improvements made to the automobile, as well as the date the vehicle was placed in service.

With the price of fuel biting into your budget, getting as much of your spending back through smart tax planning makes more sense than ever these days. In addition to the fuel efficiency of your vehicle, don't forget to add its tax efficiency in computing bottom line ownership and operating costs. Please feel free to call this office for your tax tune up.

The flagging state of the economy has left many individuals and families to cope with rising gas prices and food costs, struggle with their mortgage and rent payments, and manage credit card debt and other common monthly bills. Whether individuals are contemplating how to pay off their credit card or obtain a mortgage amid the "credit crunch" and "economic downturn," many people may be considering alternative sources of financing to reach their goals, including the tapping of a retirement account.

You can generally withdraw funds from your 401(k) three ways: through regular distributions, hardship withdrawals or plan loans. Many employers have adopted 401(k) plan provisions that allow employees to borrow money from their retirement account. Although borrowing from your 401(k) may be an option, there are several important considerations you should take into account before tapping your retirement fund.

The basics of borrowing from your 401(k) plan

The amount that you can borrow from a 401(k) plan is limited to 50 percent of the value of your vested benefit or $50,000, whichever amount is less. However, you can take a loan up to $10,000 even if it is more than one-half of the present value of your vested accrued benefit. Interest on a 401(k) plan loan is not deductible. Despite withdrawing funds from your 401(k) through a plan loan, you will remain vested in your account, subject to your obligation to repay the loan.

If certain requirements are not met, a loan from your 401(k) plan will be treated as a premature distribution for tax purposes, subjecting you to current income tax at ordinary rates plus a 10 percent early withdrawal penalty on the amount distributed, certain requirements must be met. You must repay a loan from your 401(k) within five years, subject to only one exception for a loan used to make a first-time home purchase (a principal residence, not a vacation or secondary home). This "residence exception" allows for a loan term as long as 30 years.

Loan repayments must be made at least every quarter, and are generally automatically deducted from your paycheck. If you are unable to repay the loan and default, the IRS treats the outstanding loan balance as a premature distribution from your 401(k), subject to income tax and the 10 percent early withdrawal penalty. Additionally, most plan terms require that you repay the loan within 60 days if you leave or lose your job.

Drawbacks to borrowing from your 401(k)

Before you dip into your 401(k), you need to be aware of the many disadvantages to taking money from your retirement savings. First, and foremost, many plans contain provisions that prohibit you, and your employer, from making contributions to your 401(k) until you repay the loan or for up to 12 months after the distribution. This is a critical disadvantage to borrowing money from your 401(k) because you are not saving for retirement during the time you are repaying the loan, which may take up to five years, or for the year in which contributions are prohibited. This not only means that you are not saving for retirement for a substantial period, you are also not earning a return on the money you could have contributed albeit for the suspension.

It is imperative that you consider the effects of suspended contributions and the lost earnings and tax-free compounding you could have earned on the money you borrowed from your 401(k). And, as previously discussed, if you default and are unable to pay the loan balance, the outstanding amount is treated by the IRS as a premature distribution and subject to income tax at your ordinary tax rate as well as a 10 percent early withdrawal penalty. Additionally, the maximum contribution you will be allowed to make in the year following the suspension will be reduced by the amount contributed in the prior year.

Another point to consider: the money you borrow will only earn the interest you pay on the loan. Typically, on a 401(k) plan loan, administrators use an interest rate of one to two percentage points above prime interest rates. While paying a lower interest rate to yourself may be more favorable then paying a higher interest rate to a bank, you aren't necessarily earning money, especially considering that the interest you pay on the loan could be significantly lower than the potential earnings you could be making if the money remained in your account.

Potential double taxation

In fact, the interest you pay on the loan is money taken from your paycheck, after-taxes. While it is not an additional cost you'd be paying to a bank, but paying yourself, it is money you may essentially be paying tax on twice. That is because the money you pay yourself interest with is taxed in your paycheck currently, then later when it is distributed to you from the plan in retirement as ordinary income.

If you've made, or are planning to make, a big gift before the end of 2009, you may be wondering what your gift tax liability, if any, may be. You may have to file a federal tax return even if you do not owe any gift tax. Read on to learn more about when to file a federal gift tax return.

When you must file

Most gifts you make are not subject to the gift tax. Generally, you must file a gift tax return, Form 709, U.S. Gift (and Generation-Skipping Transfer) Tax Return, if any of the following apply to gifts you have made, or will make, in 2009:

• Gifts you give to another person (other than your spouse) exceed the $13,000 annual gift tax exclusion for 2009.
• You and your spouse are splitting a gift.
• You gave someone (other than your spouse) a gift of a future interest that he or she cannot actually possess, enjoy or receive income from until some time in the future.

Remember, filing a gift tax return does not necessarily mean you will owe gift tax.

Gifts that do not require a tax return

You do not have to file a gift tax return to report three types of gifts: (1) transfers to political organizations, (2) gift payments that qualify for the educational exclusion, or (3) gift payments that qualify for the medical payment exclusion. Although medical expenses and tuition paid for another person are considered gifts for federal gift tax purposes, if you make the gift directly to the medical or educational institution, the payment will be non-taxable. This applies to any amount you directly transfer to the provider as long as the payments go directly to them, not to the person on whose behalf the gift is made.

Unified credit

Even if the gift tax applies to your gifts, it may be completely eliminated by the unified credit, also referred to as the applicable credit amount, which can eliminate or reduce your gift (as well as estate) taxes. You must subtract the unified credit from any gift tax you owe; any unified credit you use against your gift tax in one year will reduce the amount of the credit you can apply against your gift tax liability in a later year. Keep in mind that the total credit amount that you use against your gift tax liability during your life reduces the credit available to use against your estate tax.

Let's take a look at an example:

In 2009, you give your nephew Ben a cash gift of $8,000. You also pay the $20,000 college tuition of your friend, Sam. You give your 30-year-old daughter, Mary, $25,000. You also give your 27-year-old son, Michael, $25,000. Before 2009, you had never given a taxable gift. You apply the exceptions to the gift tax and the unified credit as follows:

• The qualified education tuition exclusion applies to the gift to Sam, as payment of tuition expenses is not subject to the gift tax. Therefore, the gift to Sam is not a taxable gift.
• The 2009 annual exclusion applies to the first $13,000 of your gift to Ben, Mary and Michael, since the first $13,000 of your gift to any one individual in 2009 is not taxable. Therefore, your $8,000 gift to Ben, the first $13,000 of your gift to Mary, and the first $13,000 of your gift to Michael are not taxable gifts.
• Finally, apply the unified credit. The gift tax will apply to $24,000 of the above transfers ($12,000 remaining from your gift to Mary, plus $12,000 remaining from your gift to Michael). The amount of the tax on the $24,000 is computed using IRS tables for computing the gift tax, which is located in the Instructions for Form 709. You would subtract the tax owe on these gifts from your unified credit of $345,800 for 2009. The unified credit that you can use against the gift tax in a later year (and against any estate tax) will thus be reduced. If you apply the unified credit to the amount of gift tax owe in 2009, you may not have to pay any gift tax for the year. Nevertheless, you will have to file a Form 709.

Filing a gift tax return

You must report the amount of a taxable gift on Form 709. For gifts made in 2009, the maximum gift tax rate is 45 percent. You can make an unlimited number of tax-free gifts in 2009, as long as the gifts are not more than $13,000 to each person or entity in 2009 (or $26,000 if you and your spouse make a gift jointly), without having to pay gift taxes on the transfers.

Only "qualified moving expenses" under the tax law are generally deductible. Qualified moving expenses are incurred to move the taxpayer, members of the taxpayer's household, and their personal belongings. For moving expenses to be deductible, however, a move must:

(1) Be closely related to the beginning of employment;

(2) Satisfy the time test; and

(3) Satisfy the distance test.

The purpose of the move must be employment. The worker must be moving to a new job. However, the worker need not have obtained the job before moving.

The time test requires that the individual work full time for at least 39 weeks in the first 12 months following the move. Self-employed persons must work full-time for at least 30 weeks in the first 12 months following the move, and at least 78 weeks in the 24 months following the move. Full-time employment is determined by the time customary in the worker's trade or business. Employment and self-employment may be aggregated. With respect to married couples, only one spouse must satisfy this requirement.

Even if the time test is not satisfied at the end of the first tax year ending after the move, the qualified moving expenses may be deducted in the move year. If the time test is ultimately not satisfied, an amended return must be filed in the subsequent year using Form 1040X, Amended U.S. Individual Income Tax Return.

The distance test must also be satisfied. The new principal place of employment must be at least 50 miles further from the old residence than the prior principal place of employment. If the worker has multiple places of employment, the principal place of employment must be determined. This test is satisfied if the individual is moving to his or her first principal place of employment.

Special rules apply to moving expenses of active duty military personnel and their families. There are also special rules that apply to moves outside the United States.

If you are planning a move and would like advice on how to structure expenses to maximize your tax savings, please give this office a call.

If you use your car for business purposes, you may have learned that keeping track and properly logging the variety of expenses you incur for tax purposes is not always easy. Practically speaking, how often and how you choose to track expenses associated with the business use of your car depends on your personality; whether you are a meticulous note-taker or you simply abhor recordkeeping. However, by taking a few minutes each day in your car to log your expenses, you may be able to write-off a larger percentage of your business-related automobile costs.

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If you use your car for business purposes, you may have learned that keeping track and properly logging the variety of expenses you incur for tax purposes is not always easy. Practically speaking, how often and how you choose to track expenses associated with the business use of your car depends on your personality; whether you are a meticulous note-taker or you simply abhor recordkeeping. However, by taking a few minutes each day in your car to log your expenses, you may be able to write-off a larger percentage of your business-related automobile costs.

Regardless of the type of record keeper you consider yourself to be, there are numerous ways to simplify the burden of logging your automobile expenses for tax purposes. This article explains the types of expenses you need to track and the methods you can use to properly and accurately track your car expenses, thereby maximizing your deduction and saving taxes.

Expense methods

The two general methods allowed by the IRS to calculate expenses associated with the business use of a car include the standard mileage rate method or the actual expense method. The standard mileage rate for 2017 is 53.5 cents per mile. In addition, you can deduct parking expenses and tolls paid for business. Personal property taxes are also deductible, either as a personal or a business expense. While you are not required to substantiate expense amounts under the standard mileage rate method, you must still substantiate the amount, time, place and business purpose of the travel.

The actual expense method requires the tracking of all your vehicle-related expenses. Actual car expenses that may be deducted under this method include: oil, gas, depreciation, principal lease payments (but not interest), tolls, parking fees, garage rent, registration fees, licenses, insurance, maintenance and repairs, supplies and equipment, and tires. These are the operating costs that the IRS permits you to write-off. For newly-purchased vehicles in years in which bonus depreciation is available, opting for the actual expense method may make particularly good sense since the standard mileage rate only builds in a modest amount of depreciation each year. For example, for 2017, when 50 percent bonus depreciation is allowed, maximum first year depreciation is capped at $11,160 (as compared to $3,160 for vehicles that do not qualify). In general, the actual expense method usually results in a greater deduction amount than the standard mileage rate. However, this must be balanced against the increased substantiation burden associated with tracking actual expenses. If you qualify for both methods, estimate your deductions under each to determine which method provides you with a larger deduction.

Substantiation requirements

Taxpayers who deduct automobile expenses associated with the business use of their car should keep an account book, diary, statement of expenses, or similar record. This is not only recommended by the IRS, but essential to accurate expense tracking. Moreover, if you use your car for both business and personal errands, allocations must be made between the personal and business use of the automobile. In general, adequate substantiation for deduction purposes requires that you record the following:

• The amount of the expense;
• The amount of use (i.e. the number of miles driven for business purposes);
• The date of the expenditure or use; and
• The business purpose of the expenditure or use.

Suggested recordkeeping: Actual expense method

An expense log is a necessity for taxpayers who choose to use the actual expense method for deducting their car expenses. First and foremost, always keep your receipts, copies of cancelled checks and bills paid. Maintaining receipts, bills paid and copies of cancelled checks is imperative (even receipts from toll booths). These receipts and documents show the date and amount of the purchase and can support your expenditures if the IRS comes knocking. Moreover, if you fail to log these expenses on the day you incurred them, you can look back at the receipt for all the essentials (i.e. time, date, and amount of the expense).

Types of Logs. Where you decide to record your expenses depends in large part on your personal preferences. While an expense log is a necessity, there are a variety of options available to track your car expenditures - from a simple notebook, expense log or diary for those less technologically inclined (and which can be easily stored in your glove compartment) - to the use of a smartphone or computer. Apps specifically designed to help track your car expenses can be easily downloaded onto your iPhone or Android device.

Timeliness. Although maintaining a daily log of your expenses is ideal - since it cuts down on the time you may later have to spend sorting through your receipts and organizing your expenses - this may not always be the case for many taxpayers. According to the IRS, however, you do not need to record your expenses on the very day they are incurred. If you maintain a log on a weekly basis and it accounts for your use of the automobile and expenses during the week, the log is considered a timely-kept record. Moreover, the IRS also allows taxpayers to maintain records of expenses for only a portion of the tax year, and then use those records to substantiate expenses for the entire year if he or she can show that the records are representative of the entire year. This is referred to as the sampling method of substantiation. For example, if you keep a record of your expenses over a 90-day period, this is considered an adequate representation of the entire year.

Suggested Recordkeeping: Standard mileage rate method

If you loathe recordkeeping and cannot see yourself adequately maintaining records and tracking your expenses (even on a weekly basis), strongly consider using the standard mileage rate method. However, taking the standard mileage rate does not mean that you are given a pass by the IRS to maintaining any sort of records. To claim the standard mileage rate, appropriate records would include a daily log showing miles traveled, destination and business purpose. If you incur mileage on one day that includes both personal and business, allocate the miles between the two uses. A mileage record log, whether recorded in a notebook, log or handheld device, is a necessity if you choose to use the standard mileage rate.

If you have any questions about how to properly track your automobile expenses for tax purposes, please call our office. We would be happy to explain your responsibilities and the tax consequences and benefits of adequately logging your car expenses.