The Tax Cuts & Jobs Act (TCJA) created wide sweeping changes to tax rules at both the business and individual level. Detailed below are some changes centered around vehicles that are now in effect.
Changes to the deduction for move-related vehicle expenses
The TCJA suspends the deduction for moving expenses for tax years beginning after December 31, 2017, and goes through January 1, 2026. Thus, during the suspension, no deduction is allowed for the use of an automobile as part of a move using the mileage rate listed in Notice 2018-03. This suspension does not apply to members of the Armed Forces of the United States on active duty who move pursuant to a military order related to a permanent change of station.
Changes to the deduction for un-reimbursed employee expenses
The TCJA also suspends all miscellaneous itemized deductions that are subject to the two percent of adjusted gross income floor. This change affects un-reimbursed employee expenses such as uniforms, union dues, and the deduction for business-related meals, entertainment, and travel.
Standard mileage rates for 2018
As mentioned in Notice 2018-03, the standard mileage rates for the use of a car, van, pickup, or panel truck for 2018 remain:
- 54.5 cents for every mile of business travel driven, a 1 cent increase from 2017.
- 18 cents per mile driven for medical purposes, a 1 cent increase from 2017.
- 14 cents per mile driven in service of charitable organizations, which is set by statute and remains unchanged.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical purposes is based on the variable costs.
You always have the option of calculating the actual costs of using your vehicle rather than using the standard mileage rates.
You may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.
Increased depreciation limits
The TCJA increased the depreciation limitations for passenger automobiles placed in service after December 31, 2017, for purposes of computing the allowance under a fixed and variable rate plan. The maximum standard automobile cost may not exceed $50,000 for passenger automobiles, trucks, and vans placed in service after December 31, 2017. Previously, the maximum standard automobile cost was $27,300 for passenger automobiles and $31,000 for trucks and vans.
Thus, the business standard mileage rate listed in Notice 2018-03, which was issued before the TCJA passed, cannot be used to claim an itemized deduction for un-reimbursed employee travel expenses in taxable years beginning after December 31, 2017, and before January 1, 2026.
For more information, always consult a Certified Public Accountant. Submitted by: Dennis Gallant, Senior Manager, Tax Services, Thomas Howell Ferguson P.A. CPAs. If you have any questions, contact Dennis here.