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IRS ‘Rules related to business expenses’ for 2018

Posted on January 22, 2018

With the deletion of 2% Miscellaneous Itemized Deductions in 2018, employees can no longer deduct unreimbursed business expenses, including mileage, on Schedule A of form 1040.

Mileage expenses can still be deducted on Schedule C — if — you are an independent contractor, or as a medical deduction for trips to doctors, etc., and for miles driven while providing services to a charity.

IRS established revised mileage rates for 2018, which are up slightly from last year:

  • 5 cents per business mile, up 1 cent from 2017
  • .18 cents per mile for medical or moving reasons, up 1 cent from 2017
  • .14 cents per charity drive, unchanged since the rate is set by a statue

To use the mileage rates, you must remember to track your mileage for each of the allowable activities. Since this is so easy to forget, you may want to consider using MileIQ.com (or another app like it) to automatically track your mileage and create an accurate contemporaneous mileage report that fulfills IRS mileage requirements.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs from the same study.

Do you have to use this calculation?

Actually, no. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

However, taxpayers may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.

In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.  These and other requirements are described in IRS bulletin Rev. Proc. 2010-51.

What about parking?

An employer may reimburse or directly pay employees for up to $260 per month during 2018 for parking. This is classified as a non-taxable fringe benefit to the employee. The parking must be job-related and on or near the employer’s business location.

Now you know the “rules of the road,” according to new 2018 tax regulations. As always, TSPA will continue to provide you with important information about the new 2018 tax law as it becomes available.

In the meantime, of you have specific questions please let us know.