Effective on January 1, 2019, the International Revenue Service (IRS) issued new, optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical, or moving purposes. The rate for medical and moving purposes is based on the variable costs, while the standard mileage rate for business use is based off an annual study of the fixed variable costs of operating a vehicle.
The Facts and Figures
1:
The business mileage rate is now 58 cents per mile driven for business use, a 3.5-cent increase from 2018.
2:
It is 20-cents per mile driven for medical or moving purposes, a 2-cent increase from 2018.
3:
No change in the rate for miles driven for service charitable organizations (remains at 14-cents).
The Notice made by the IRS also reminds of the changes made by the Tax Cuts and Job Act (TCJA). Taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses, and the only members that can claim a deduction for moving expenses include members of the Armed Forces on active duty moving under orders to a permanent change of station.
Who is Impacted and How
Organizations with business travelers who are incurring unreimbursed travel costs, such as automobile use, will need to determine whether to supplement tax assistance to take account of those costs that are no longer deductible. Persons who are self-employed can still claim a tax deduction for their mileage as a business expense; they can do this by adding up their business miles for the year, then multiplying that by the standard mileage rate. The IRS does require that self-employed people utilize a mileage-tracking app or use a mileage log if they deduct their business miles. Taxpayers cannot use the 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, and the standard rate cannot be used for more than four vehicles in operation simultaneously.
In relation to mobility, companies will need to adjust their reimbursement policies and decide whether to use the standard rate or not. In alignment, unreimbursed travelers will no longer be able to deduct automobile expenses, and companies may want to re-examine their current reimbursement policies.
You can read the full announcement from the IRS within Announcement IR-2018-251.