The Internal Revenue Service published information May 25 on changes from the Tax Cuts and Jobs Act (TCJA) that affect deductions for unreimbursed employee expenses, move-related vehicle expenses, and standard mileage rates and travel expenses.
Before the TCJA was passed last December, the IRS issued a business standard mileage rate in Notice 2018-03. The mileage rate set for use of a car, van, pickup or panel truck was 54.5 cents for every mile of business travel driven, 18 cents per mile driven for medical purposes or moving purposes, and 14 cents per mile driven in service of charitable organizations. The TCJA then suspended miscellaneous itemized deductions, so the following effects are noted for these vehicle-related categories:
Changes to move-related vehicle expenses
The Tax Cuts and Jobs Act suspends the deduction for moving expenses for tax years beginning after Dec. 31, 2017, and goes through Jan. 1, 2026. During the suspension, no deduction is allowed for use of an automobile as part of a move. This suspension does not apply to members of the Armed Forces of the U.S. on active duty who move pursuant to a military order related to a permanent change of station.
Changes to unreimbursed employee expenses
The TJCA suspends all miscellaneous itemized deductions that are subject to the 2 percent of adjusted gross income floor. This affects unreimbursed employee expenses such as uniforms, union dues, and the deduction for business-related meals, entertainment and travel.
This means that the business standard mileage rate cannot be used to claim an itemized deduction for unreimbursed employee travel expenses in taxable years beginning after Dec. 31, 2017, and before Jan. 1, 2026.
Changes to vehicle depreciation expense used in a trade or business
The TCJA increases the depreciation limitations for passenger automobiles used in a trade or business and 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 automobiles, trucks and vans placed in service after Dec. 31, 2017. Previously, the maximum standard automobile cost was $27,300 for passenger automobiles and $31,000 for trucks and vans. Unlike the other TCJA changes listed here, this one is permanent.
Please contact Sandy Abalos for more information on these tax reform changes.