Individuals can deduct some vehicle-related expenses in certain circumstances. Rather than keeping track of the actual costs, you can use a standard mileage rate to compute your deductions. For 2017, you might be able to deduct miles driven for business, medical, moving and charitable purposes. For 2018, there are significant changes to some of these deductions under the Tax Cuts and Jobs Act (TCJA).
Mileage rates vary
The rates vary depending on the purpose and the year:
Business: 53.5 cents (2017), 54.5 cents (2018)
Medical: 17 cents (2017), 18 cents (2018)
Moving: 17 cents (2017), 18 cents (2018)
Charitable: 14 cents (2017 and 2018)
The business standard mileage rate is considerably higher than the medical, moving and charitable rates because the business rate contains a depreciation component. No depreciation is allowed for the medical, moving or charitable use of a vehicle. The charitable rate is lower than the medical and moving rate because it isn’t adjusted for inflation.
In addition to deductions based on the standard mileage rate, you may deduct related parking fees and tolls.
2017 and 2018 limits
The rules surrounding the various mileage deductions are complex. Some are subject to floors and some require you to meet specific tests in order to qualify.
For example, if you’re an employee, only business mileage not reimbursed by your employer is deductible. It’s a miscellaneous itemized deduction subject to a 2% of adjusted gross income (AGI) floor. For 2017, this means mileage is deductible only to the extent that your total miscellaneous itemized deductions for the year exceed 2% of your AGI. For 2018, it means that you can’t deduct the mileage, because the TCJA suspends miscellaneous itemized deductions subject to the 2% floor for 2018 through 2025.
If you’re self-employed, business mileage can be deducted against self-employment income. Therefore, it’s not subject to the 2% floor and is still deductible for 2018 through 2025, as long as it otherwise qualifies.
Miles driven for health-care-related purposes are deductible as part of the medical expense deduction. And an AGI floor applies. Under the TCJA, for 2017 and 2018, medical expenses are deductible to the extent they exceed 7.5% of your adjusted gross income. For 2019, the floor will return to 10%, unless Congress extends the 7.5% floor.
And while miles driven related to moving can be deductible on your 2017 return, the move must be work-related and meet other tests. For 2018 through 2025, under the TCJA, moving expenses are deductible only for certain military families.
Substantiation and more
There are also substantiation requirements, which include tracking miles driven. And, in some cases, you might be better off deducting actual expenses rather than using the mileage rates.
We can help ensure you deduct all the mileage you’re entitled to on your 2017 tax return but don’t risk back taxes and penalties later for deducting more than allowed. Contact us for assistance and to learn how your mileage deduction for 2018 might be affected by the TCJA.
If you moved for work-related reasons in 2017, you might be able to deduct some of the costs on your 2017 return — even if you don’t itemize deductions. (Or, if your employer reimbursed you for moving expenses, that reimbursement might be excludable from your income.) The bad news is that, if you move in 2018, the costs likely won’t be deductible, and any employer reimbursements will probably be included in your taxable income.
Suspension for 2018–2025
The Tax Cuts and Jobs Act (TCJA), signed into law this past December, suspends the moving expense deduction for the same period as when lower individual income tax rates generally apply: 2018 through 2025. For this period it also suspends the exclusion from income of qualified employer reimbursements of moving expenses.
The TCJA does provide an exception to both suspensions for active-duty members of the Armed Forces (and their spouses and dependents) who move because of a military order that calls for a permanent change of station.
Tests for 2017
If you moved in 2017 and would like to claim a deduction on your 2017 return, the first requirement is that the move be work-related. You don’t have to be an employee; the self-employed can also be eligible for the moving expense deduction.
The second is a distance test. The new main job location must be at least 50 miles farther from your former home than your former main job location was from that home. So a work-related move from city to suburb or from town to neighboring town probably won’t qualify, even if notmoving would have increased your commute significantly.
Finally, there’s a time test. You must work full time at the new job location for at least 39 weeks during the first year. If you’re self-employed, you must meet that test plus work full time for at least 78 weeks during the first 24 months at the new job location. (Certain limited exceptions apply.)
The moving expense deduction is an “above-the-line” deduction, which means it’s subtracted from your gross income to determine your adjusted gross income. It’s not an itemized deduction, so you don’t have to itemize to benefit.
Generally, you can deduct:
- Transportation and lodging expenses for yourself and household members while moving,
- The cost of packing and transporting your household goods and other personal property,
- The expense of storing and insuring these items while in transit, and
- Costs related to connecting or disconnecting utilities.
But don’t expect to deduct everything. Meal costs during move-related travel aren’t deductible - nor is any part of the purchase price of a new home or expenses incurred selling your old one. And, if your employer later reimburses you for any of the moving costs you’ve deducted, you may have to include the reimbursement as income on your tax return.
Please contact us if you have questions about whether you can deduct moving expenses on your 2017 return or about what other tax breaks won’tbe available for 2018 under the TCJA.
Recently there have been numerous different types of tax scams. Below is an article from the IRS outlining a few of these scams and what you should do if you find yourself a target.
Source:Tax scams/consumer alerts. IRS, https://www.irs.gov/newsroom/tax-scams-consumer-alerts
Tax Scams / Consumer Alerts
Scams Targeting Taxpayers
A sophisticated phone scam targeting taxpayers, including recent immigrants, has been making the rounds throughout the country. Callers claim to be IRS employees, using fake names and bogus IRS identification badge numbers. They may know a lot about their targets, and they usually alter the caller ID to make it look like the IRS is calling.
Victims are told they owe money to the IRS and it must be paid promptly through a gift card or wire transfer. Victims may be threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting. Victims may be told they have a refund due to try to trick them into sharing private information. If the phone isn't answered, the scammers often leave an “urgent” callback request.
Soliciting Form W-2 information from payroll and human resources professionals.
Surge in Email, Phishing and Malware Schemes
Fraudsters Posing as Taxpayer Advocacy Panel
Additional Recent Tax Scams
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