With inflation running at the highest levels in several decades, members of Congress are concerned about adjusting taxpayer credits and deductions to account for the soaring inflation. Sen. Chuck Grassley has been a leader in proposing inflation adjustments that will help Americans.
He published a press release on July 21 and said he seeks "to help Americans struggling to afford everyday expenses keep more of their hard-earned money." Grassley notes an Iowa State University study showing that most individuals are paying $669 more per month for living expenses. This increase occurred during the past two years.
Grassley proposes to index several tax benefits for inflation. He stated, "The relentless 40-year-high inflation we are seeing today has made it increasingly difficult for Americans to afford their trips to the gas station and grocery store. Indexing useful tax credits to inflation – like the Child Tax Credit and the Lifetime Learning Credit – will help parents and students keep up with rising costs. I will continue to work on common-sense policies that will help Americans weather this soaring inflation."
The proposed bill would provide indexing for the Child Tax Credit, the American Opportunity Tax Credit, the Lifetime Learning Credit, the Student Loan Interest Deduction and the charitable mileage deduction.
Child Tax Credit: This is a $2,000 credit for families with dependent children under 17. This credit and a $500 credit for other dependents would be indexed.
Child and Dependent Care Credit: The credit for child-care expenses is currently $2,100 for two or more children and $1,050 for one child. It would also be indexed.
American Opportunity Tax Credit: To enable individuals to attend college, there is a $2,500 credit for tuition expenses. This would be indexed.
Lifetime Learning Credit: Another potential benefit for payment of eligible tuition is the Lifetime Learning Credit of $2,000.
Student Loan Interest Deduction: Many Americans complete college or university with substantial student loans. Up to $2,500 in interest on student loans may be deducted.
Charitable Mileage Deduction: Individuals who volunteer for charitable organizations will frequently incur costs to drive to various organizational events. The current $0.14 per mile deduction is far lower than the rate for medical or business driving. The bill proposes to allow the IRS to adjust the mileage rate based on current costs.
Note: All of these tax benefits, except the charitable mileage deduction, have phaseouts for taxpayers with higher incomes. These phaseout amounts would be indexed. Individuals who volunteer for charitable organizations hope that charitable mileage deduction will finally be increased; with the dramatic increase in the cost of gasoline this year, the 14-cents-per-mile rate is outdated. Members of Congress have proposed increasing the charitable mileage rate to the business rate of 62.5 cents per mile.
Yearly tax work often brings up thoughts of the future. The American Legion’s Planned Giving program is a way of establishing your legacy of support for the organization while providing for your current financial needs. Learn more about the process, and the variety of charitable programs you can benefit, at legion.org/plannedgiving.