Moving and Mileage: Roundup of TCJA Changes
The IRS has provided information to taxpayers and employers about changes related to the Tax Cuts and Jobs Act on the rules for these expenses: moving, vehicle and unreimbursed employee. But there's a bright spot: The agency offered information about higher depreciation limits for some vehicles.
The TCJA, the tax overhaul that Congress passed last December, suspends the deduction for moving expenses for tax years after Dec. 31, 2017, through Jan. 1, 2026. No deduction is allowed for use of an automobile, except for members of the armed forces on active duty who move because they've been ordered to a change of station.
Another suspension relates to all miscellaneous itemized deductions that are subject to the 2 percent of adjusted gross income floor. This change affects such unreimbursed employee expenses as uniforms, union dues, and the deduction for business-related meals, entertainment and travel.
This means that the business standard mileage rate issued before the Tax Cuts and Jobs Act passed can't be used to claim an itemized deduction for unreimbursed employee travel expenses in taxable years from Dec. 31, 2017, to Jan. 1, 2026. For more guidance, there's a revised Notice 2018-03 to peruse. It discusses rules for computing the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes, and for substantiating, under §274(d) of the Internal Revenue Code and §1.274- 5 of the Income Tax Regulations, the amount of ordinary and necessary business expenses of local transportation or travel away from home.
The standard mileage rates for the use of a car, van, pickup or panel truck for 2018 remain as follows:
- 54.5 cents for every mile of business travel driven, a 1 cent increase from 2017.
- 18 cents per mile driven for medical purposes, also a 1 cent increase from 2017.
- 14 cents per mile driven in service of charitable organizations, 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.
Taxpayers always have an option of calculating the actual costs of using their vehicle instead of using the standard mileage rates. You should know, however, that you can't use the business mileage rate if you've already decided to take any depreciation method under the Modified Accelerated Cost Recovery System or after claiming a Section 179 deduction for that vehicle. Neither can you use the standard mileage rate for more than four vehicles simultaneously.
The Tax Cuts and Jobs Act increases the depreciation limitations for passenger cars placed in service after Dec. 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 cars, trucks or vans placed in service in the same time period. Previously, the maximum standard automobile cost was $27,300 for passenger cars and $31,000 for trucks and vans.
Notice 2018-42, posted on IRS.gov, contains information about the update to standard mileage rates, including details about the suspension of the deduction for operating a vehicle for moving purposes.