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Transcript
- Lucas: So the S&P 500 is sitting at 7,416 today, gold is flirting with 4,050, and headline CPI just dipped to 332.6 from 333.98 a month ago. Everyone is watching the inflation cooling narrative. Luna: Right, the Fed's holding rates at 3.63, breakevens are still above 2.2. But I know you're not going to talk about gold or stocks today. Lucas: No, I want to talk about a number that has not moved in 29 years. Fourteen cents. That is the IRS charitable mileage deduction rate for driving your personal vehicle for volunteer work. Luna: Fourteen cents a mile. That's been stuck since 1997? I remember that number from when I was in high school. Lucas: Correct. The business mileage rate gets adjusted every year—it's 67 cents per mile for 2026. Medical and moving mileage is 24 cents. But charity driving? Fourteen cents. And if you look at the cumulative CPI since 1997, prices have roughly doubled. So that deduction has lost about 40 percent of its real value. Luna: That is a quiet erosion. And it's not like people are driving less for charity. According to the IRS, millions of Americans claim this deduction every year. Lucas: Exactly. Think about a volunteer who drives 1,000 miles per year for a food bank or a hospice. At 14 cents, they deduct $140. If the rate had kept pace with inflation, it would be closer to 28 cents—so $280. They're effectively losing $140 of real tax benefit. Luna: And that's assuming they itemize. Most volunteers don't even itemize, so they get zero benefit. But even for those who do, the gap is real. Lucas: Right. And here's the thing—the law that sets this rate is in the Internal Revenue Code, Section 170. It says the rate 'shall be' the standard mileage rate for charitable purposes, but the IRS has interpreted that as a fixed 14 cents unless Congress changes it. It's not indexed to inflation. Luna: So Congress would have to pass a bill. Has anyone tried? There was a bill in 2022—the Charitable Mileage Parity Act—that would have tied the rate to the business rate. It didn't pass. Lucas: It didn't. And look, it's a small dollar amount per taxpayer, but across millions of volunteers, it's billions of dollars of foregone benefit. The Joint Committee on Taxation estimated indexing it would cost about $300 million per year in lost revenue. That's not nothing, but it's tiny in the federal budget. Luna: And yet it hasn't happened. Why do you think? Partisanship? Lobbying? Or just nobody's championed it? Lucas: I think it's a combination of low salience and the fact that it's framed as a tax expenditure. Every time you index a deduction, it looks like you're cutting revenue. And in a polarized environment, small-bore tax fixes get buried. But functionally, inflation is doing the cutting for them. Luna: So what can a volunteer do practically? If they're driving for a nonprofit, can they ask the organization to reimburse them at a higher rate? Lucas: They can, but then the reimbursement is tax-free only up to 14 cents per mile. Anything above that is considered taxable income to the volunteer. So the nonprofit could reimburse at the business rate, but the volunteer would owe tax on the excess. It's messy. Luna: Or they could just not deduct and instead claim the actual costs—gas, maintenance, depreciation. But that's a lot more paperwork. Lucas: Exactly. And most people don't keep detailed logs. The standard mileage deduction is supposed to simplify things. But when the standard rate is frozen, simplification becomes a trap. Luna: I want to zoom out for a second. This is a perfect example of bracket creep in reverse. Usually people talk about inflation pushing you into a higher tax bracket. Here, inflation is pushing the value of your deduction down. Lucas: That's a great way to put it. And it's not just mileage. There are dozens of fixed-dollar thresholds in the tax code—like the $3,000 capital loss limit, the personal exemption phaseout—that have been eroded over time. But the mileage deduction is one of the most visible. Luna: Especially because it affects a behavior we want to encourage—volunteering. You'd think lawmakers would want to make it easier, not harder. Lucas: You would. And some states have stepped in. California, for example, allows a state deduction that's tied to the business rate for charitable driving. But federally, it's stuck. Luna: So if you're listening and you volunteer, you should know that you might be losing out. Keep track of your miles anyway, even if you don't itemize. And maybe write your member of Congress. Lucas: If our money conversations have helped you think about a decision differently, or just made you a little more aware of how inflation creeps into everyday tax breaks, a couple of dollars a month is genuinely what keeps these going. Buy me a coffee dot com slash fexingo, if you've gotten something out of them. Luna: Yeah, it's a small way to keep the show ad-free and focused on the numbers that actually matter. And we appreciate it. Lucas: So back to the charity mileage deduction. One idea that's been floated is to simply link it to the business rate and let it float annually. That would cost about $300 million a year, but it would restore the real value. And it would be automatic—no more congressional fights. Luna: Would that require a new law, or could the IRS do it by regulation? Lucas: The IRS says they're bound by the statute. So Congress would have to amend Section 170. It's a simple fix—replace '14 cents' with 'the standard business mileage rate for the year.' But simple doesn't mean easy. Luna: Let me check the latest CPI print again. June 2026, all items 332.6. That's down from 333.98 in May. So inflation is cooling, but the damage is done. The deduction has already lost decades of value. Lucas: Right. And even if inflation stays at 2.5 percent, the deduction will lose another 25 percent of its value over the next decade if nothing changes. So the clock is ticking. Luna: I think the takeaway is: if you volunteer and drive, don't assume the tax code is fair. It's not. And you might want to talk to your CPA about whether actual expenses work better for you. Lucas: Good advice. And for donors and nonprofit leaders, this is worth raising with your representatives. A small policy change could make a big difference for the millions of people who drive to serve others. Luna: Alright, Lucas. Next episode, I want to look at something similar—maybe the HSA contribution limits, which are indexed but with a lag. Lucas: I like it. HSA limits are a classic example of inflation indexing that's actually working, but with a one-year delay. We'll compare that to the mileage deduction mess. Stay tuned.