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Vehicle-expense deductions – A guide for individual taxpayers

It’s not just businesses that can deduct vehicle-related expenses. Individuals can also deduct them on their tax returns in certain circumstances. Unfortunately, the Tax Cuts and Jobs Act (TCJA) might reduce the deduction in comparison to what could have been claimed on prior years’ tax returns.

For 2017, miles driven for business, moving, medical and charitable purposes were deductible depending on your circumstances. For 2018 through 2025, TCJA changes make business and moving miles deductible only on a much more limited basis, and it can also affect your tax benefits from medical and charitable miles.

For 2018 through 2025, TCJA changes make business and moving miles deductible only on a much more limited basis, and it can also affect your tax benefits from medical and charitable miles.

2018 limits vs. 2017

Before 2018, if you were an employee, you potentially could deduct business mileage not reimbursed by your employer as a miscellaneous itemized deduction. But the deduction was subject to a 2% of adjusted gross income (AGI) floor, which meant that mileage was deductible only to the extent that your total miscellaneous itemized deductions for the year exceeded 2% of your AGI. For 2018 through 2025, you can’t deduct the mileage regardless of your AGI. Why? The TCJA suspended ALL miscellaneous itemized deductions subject to the 2% floor.

If you’re self-employed, business mileage may still be deducted from self-employment income. Therefore, it’s not subject to the 2% floor and is a tax deduction for 2018 through 2025, as long as it otherwise qualifies (i.e., is ordinary, necessary and is properly substantiated).

Miles incurred in job change relocation move before 2018 were generally deductible “above the line” (that is, itemizing isn’t required to claim the deduction). But for 2018 through 2025, under the TCJA, moving expenses are no longer deductible (there is a limited exception that allows moving deductions   for certain military families).

Miles driven for health-care-related purposes are deductible as part of the medical expense itemized deduction. Under the TCJA, for 2017 and 2018, medical expenses are deductible to the extent they exceed 7.5% of your AGI. For 2019, the floor returns to 10%, unless Congress extends the 7.5% floor.

The limits for deducting expenses for charitable miles driven haven’t changed, but keep in mind they still are allowed as a donation if you claim itemized deductions.

So, you can claim the deductions for medical miles and charitable miles only if you itemize. However, for 2018 through 2025, the standard deduction has been nearly doubled from 2017 to 2018 ($6,350 to $12,000 for single filers, and $12,700 to $24,000 for married filed jointly filers). Depending on your total itemized deductions, you might be better off claiming the standard deduction in 2018, in which case you’ll get no tax benefit from your charitable miles (or from your medical miles, even if you exceed the AGI floor).

Differing mileage rates

Rather than keeping track of your actual vehicle expenses, you can use a standard mileage rate to compute your deductions (miles times the rate = your deduction). The rates vary depending on the purpose and the year:

  • Business: 54.5 cents (2018), 58 cents (2019)
  • Medical: 18 cents (2018), 20 cents (2019)
  • Moving: 18 cents (2018), 20 cents (2019)
  • Charitable: 14 cents (2018 and 2019)

In addition to deductions based on the standard mileage rate, you may deduct related parking fees and tolls. There are also substantiation requirements, which include tracking miles driven.

We’re here to help

Do you have questions about deducting vehicle-related expenses?  Please contact your Wegner CPAs tax advisor for help you with your 2018 return and any 2019 tax planning questions you may have.

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