Updated Rules: Deductible Business & Other Expenses
Taxpayers using optional standard mileage rates in computing the deductible costs of operating an automobile for business, charitable, medical or moving expense purposes should be aware of an updated set of rules. The updated rules reflect changes to certain deductible expenses resulting from the Tax Cuts and Jobs Act (TCJA).
Also updated, are tax rules relating to substantiating the amount of an employee's ordinary and necessary travel expenses reimbursed by an employer using the optional standard mileage rates. As such, taxpayers are not required to use the standard mileage rate, but may instead use actual allowable expenses as long as they maintain adequate records that substantiate these expenses.
In addition, a number of modifications and clarifications are also in effect, including - but not limited to - the following for tax years 2018-2025 (the "suspension period"):
A taxpayer may not use the business standard mileage rate to claim a miscellaneous itemized deduction for the suspension period.
A taxpayer may not claim a miscellaneous itemized deduction during the suspension period for parking fees and tolls attributable to the taxpayer using the automobile for business purposes.
Amounts paid under a mileage allowance to an employee regardless of whether the employee incurs deductible business expenses are treated as paid under a nonaccountable plan.
The TCJA suspended for tax years 2018-2025 the miscellaneous itemized deduction for most employees with unreimbursed business expenses, including the costs of operating an automobile for business purposes. Self-employed individuals, however, as well as certain employees, such as Armed Forces reservists, qualifying state or local government officials, educators, and performing artists, may continue to deduct unreimbursed business expenses during the suspension.
The TCJA also suspended the deduction for moving expenses during these same tax years. However, this suspension does not apply to a member of the Armed Forces on active duty who moves pursuant to a military order and incident to a permanent change of station.