New Rules for Tax Treatment of Motor Vehicle Use in 2018 by Flor Escudero, CPA
The use of a motor vehicle can sometimes provide individuals and businesses with tax benefits. Here is what taxpayers need to know for 2018.
Increased Standard Mileage Rates
Taxpayers have the option to deduct the actual use of their cars, vans, pickups and panel trucks for multiple purposes or, they may simply apply the standard mileage rates, which the IRS resets annually. Following are the standard mileage rates for 2018:
- 54.5 cents for every mile driven for business purposes,
- 18 cents per mile driven for medical purposes, and
- 14 cents per mile driven in service of a charitable organization, including travel to and from volunteer work
Taxpayers may not use these rates for more than four motor vehicles they use simultaneously. Nor may they use the business travel rate if they previously used a depreciation method under the Modified Accelerated Cost Recovery System or after they claimed a Section 179 deduction for that vehicle.
Temporary Elimination of Deductions Other Vehicle Expenses
Between Jan. 1, 2018, and Dec. 31, 2025, the IRS will not permit taxpayers to deduct job-related moving expenses, including the miles a taxpayer travels in his or her automobile as part of the move, unless the taxpayer is a member of the Armed Forces of the United States.
In addition, the Tax Cuts and Jobs Act temporarily eliminates all un-reimbursed employee expenses such as uniforms, union dues and the deduction for business-related meals, entertainment and travel. Therefore, taxpayers may not apply the business standard mileage rate to claim an itemized deduction for un-reimbursed employee travel expenses.
Increased Depreciation Limits
The Tax Cuts and Jobs Act increases the depreciation limitations for passenger automobiles 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.
About the Author: Flor Escudero, CPA, is a senior manager of Tax Services with Berkowitz Pollack Brant, where she provides domestic and international tax guidance to businesses and high-net-worth individuals. She can be reached at the CPA firm’s Miami office at (305) 379-7000 or via email at firstname.lastname@example.org.
Information contained in this article is subject to change based on further interpretation of tax laws and subsequent guidance issued by the Internal Revenue Service.