Employees who drive their own cars on the job for their companies no longer can expect Uncle Sam to pick up the tab for those miles. Their employers — maybe. But not the federal government.
The new Tax Cuts and Jobs Act put the brakes on unreimbursed business mileage.
Let’s be clear about this. The IRS still allows deductions for driving on business. In fact, the IRS raised the mileage rate for 2018 by a penny from last year; it’s now 54.5 cents a mile. But, although employers and proprietors can claim mileage as a normal business expense, their employees cannot.
It’s more than mileage. The new law “suspended” a range of unreimbursed employee expenses for the next eight years. For example, studious workers can no longer write off their spending for educational courses needed to keep their jobs or current salaries. Personal spending for items such as uniforms, union dues, business-related meals and entertainment, and others also is involved.
Previously, the IRS and Congress had allowed those types of expenses to be deducted from income if they amounted to more than 2 percent of adjusted gross income.
In practice, many employees have been accepting whatever mileage rate their companies offered and then claiming the difference up to the official IRS rate (53.5 cents last year) on their tax returns. The mileage was claimed on Schedule A.
Now, those employees lose that deduction, EricJohn Ltd. owner Eric Buechler says. They’ll have to depend entirely on their company mileage rates for any reimbursement.
The new law also suspended another common deduction involving miles on the road. It took out the tax break for job-related moving expenses, which would have allowed 18 cents a mile in 2018. The main exception is for military being transferred to new posts.
In the big picture, Congress undoubtedly had a trade-off in mind. The disappearance of those write-offs will be offset in many cases by a much larger standard deduction. In this tax year, it has risen to $24,000 for a married couple, almost double the past allowance, and to $12,000 for a single taxpayer. A lot fewer people will be itemizing expenses in 2018 than in prior years, the Kiplinger Tax Letter notes.
If you’re really curious and want to wade through the details, you’ll find them under IRS Notice 2018-42.
A last word about vehicles and business mileage. Beyond the unreimbursed issue, some business owners also need to know about new limits in the Tax Cuts and Jobs Act involving depreciation and numbers of vehicles in service.
Of course, we at EricJohn Ltd. can keep you up to date with a phone call or email.