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Vehicle and Unreimbursed Employee Expenses Under the Tax Cuts and Jobs Act

In a Notice and accompanying news release, IRS has provided updated information to taxpayers and employers about changes from the Tax Cuts and Jobs Act (TCJA) affecting vehicle and unreimbursed employee expenses.

Background

On December 14, 2017, shortly before the enactment of the TCJA, IRS released optional standard mileage rates for 2018, as well as the amounts used in calculating reductions to basis for depreciation taken under the business standard rate and the maximum standard automobile cost that may be used in computing the allowance under a fixed and variable rate plan.

New Notice reflects TCJA changes

The TCJA made many tax law changes, including those affecting move-related vehicle expenses, unreimbursed employee expenses, and vehicle expensing, as outlined below.

Specifically, the TCJA generally suspended the deduction for moving expenses for tax years beginning after 2017 and before 2026, with an exception for certain members of the Armed Forces. During the suspension, no deduction is allowed for use of an automobile as part of a move using the 18¢ mileage rate.

The TCJA also suspended, for tax years beginning after 2017 and before 2026, all miscellaneous itemized deductions that are subject to the 2%-of-AGI (adjusted gross income) floor, including unreimbursed employee travel expenses. Thus, the business standard mileage rate can’t be used to claim an itemized deduction for unreimbursed employee travel expenses in tax years during the suspension.

Finally, the TCJA increased the depreciation limitations for passenger automobiles placed in service after 2017. The maximum standard automobile cost may not exceed $50,000 for passenger automobiles, trucks and vans placed in service after 2017 (up from $27,300 for passenger automobiles and $31,000 for trucks and vans).

 

 

 

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