Monthly Archives: January 2018
As it does every year, the Internal Revenue Service has announced the inflation- adjusted 2018 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable or medical purposes.
Beginning on Jan. 1, 2018, the standard mileage rates for the use of a car (or a van, pickup or panel truck) are:
- 54.5 cents per mile for business miles driven (including a 25-cent-per-mile allocation for depreciation). This is up from 53.5 cents in 2017
- 18 cents per mile driven for medical purposes. This is up from 17 cents in 2017
- 14 cents per mile driven in service of charitable organizations.
The business standard mileage rate is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical purposes is based on the variable costs as determined by the same study. The rate for using an automobile while performing services for a charitable organization is statutorily set (it can only be changed by Congressional action) and has been 14 cents per mile for over 15 years.
Something to consider… The 2018 rates are based on 2017 fuel costs. Based on the potential for substantially higher gas prices in 2018, it may be appropriate to consider switching to the actual expense method for 2018, or at least keeping track of the actual expenses, including fuel costs, repairs, maintenance, etc., so that the option is available for 2018.
Taxpayers always have the option of calculating the actual costs of using their vehicle for business rather than using the standard mileage rates, as long as standard mileage was used in the first year the vehicle was operated. However, the standard mileage rates cannot be used if you have used the actual expense method in previous years. This rule is applied on a vehicle-by-vehicle basis. The business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles simultaneously.
Employer Reimbursement – When employers reimburse employees for business-related car expenses using the standard mileage allowance method for each substantiated employment-connected business mile, the reimbursement is tax-free if the employee substantiates to the employer the time, place, mileage and purpose of employment-connected business travel.
The Tax Cuts and Jobs Act eliminated employee business expenses as an itemized deduction, effective for 2018 through 2025. Therefore, employees may no longer take a deduction on their federal returns for unreimbursed employment-related use of their cars.
If you have questions related to the best methods of deducting the business use of your vehicle or the documentation required, please give us a call or ask your tax consultant during your tax meeting.