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Standard Mileage Rates Updated to Reflect Elimination of Miscellaneous Itemized Deductions

Posted Tuesday, June 12, 2018 6:25 am

In Notice 2018-42, the IRS has updated Notice 2018-3, to reflect changes to the tax law made by the Tax Cuts and Jobs Act (TCJA; P.L. 115-97). Changes impacting Notice 2018-3 include:

  • the suspension of the deduction for un-reimbursed employee expenses;
  • the suspension of the deduction for move related expenses; and
  • the increase of depreciation limits for passenger vehicles.

Un-reimbursed employee expenses. Notice 2018-3 stated that taxpayers, including those deducting unreimbursed employee travel expenses, could use the standard mileage rate of 54.5 cents per mile. The TCJA suspends all miscellaneous itemized deductions that are subject to the 2 percent of adjusted gross income floor until January 1, 2026. This includes unreimbursed employee travel expenses. Therefore, Notice 2018-3 cannot be used to claim a deduction for such expenses. There are certain taxpayers who may continue to deduct itemized unreimbursed employee travel expenses. These include:

  • members of a reserve component of the U.S. Armed Forces;
  • state or local government officials paid on a fee basis; and
  • certain performing artists.

Thus, Notice 2018-3 will continue to apply to those above listed taxpayers claiming deductions for unreimbursed employee travel expenses.

Move related expenses. Notice 2018-3 also provided a standard mileage rate of 18 cents per mile for moving expenses pursuant to Code Sec. 217. TCJA suspends the deduction for moving expenses until January 1, 2026. This suspension does not apply to members of U.S. Armed Forces on active duty who move pursuant to a military order under Code Sec. 217(g). Thus, the standard mileage rate for moving expenses listed in Notice 2018-3 is not applicable to taxpayers, unless Code Sec. 217(g) applies.

Increase of depreciation limits for passenger vehicles. Notice 2018-3 stated that the maximum depreciation limitations for passenger automobiles placed in service after Dec. 31, 2017, for purposes of computing the allowance under a fixed and variable rate. The stated maximum for standard automobile cost was $27,300 for passenger automobiles and $31,000 for trucks and vans. TCJA increases the depreciation limitations for passenger automobiles placed in service after December 31, 2017. Under the law, the maximum standard automobile cost may not exceed $50,000 for passenger automobiles, trucks and vans placed in service after Dec. 31, 2017.

The standard mileage rate of 54.5 cents per mile cannot be used for taxpayers claiming unreimbursed employee travel expenses, with limited exceptions. Members of a reserve component of the U.S. Armed Forces, state or local government officials paid on a fee basis, and certain performing artists may still use the standard mileage rate to calculate unreimbursed employee travel expenses. The standard mileage rate of 18 cents per mile for moving expenses is no longer applicable unless Code Sec. 217(g) applies to the taxpayer. Finally, for purposes of computing the allowance under an FAVR plan, the standard automobile cost may not exceed $50,000 (increased from $27,900 for standard automobiles and $31,300 for trucks and vans).

Source: Wolters Kluwer (citing Notice 2018-42, I.R.B. 2018-24, June 11, 2018.)

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