Modifications to standard mileage rates for 2018 | KPMG | US

Notice 2018-42: Modifications to standard mileage rates for 2018

Modifications to standard mileage rates for 2018

The IRS today issued an advance version of Notice 2018-42 that modifies prior guidance (Notice 2018-03) concerning the standard mileage rates for taxpayers to use in computing the deductible costs of operating an automobile for business, charitable, medical or moving purposes in 2018.

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The 2018 update to the standard mileage rate guidance initially provided by Notice 2018-03 was issued on December 14, 2017, and thus did not reflect certain changes made by the new tax law (Pub. L. No. 115-97, enacted December 22, 2017). 

Today’s release reflects the changes made by the new tax law. Read Notice 2018-42 [PDF 16 KB] and read a related IRS release (IR-2018-127)

Increased depreciation limits

The new tax law increased the depreciation limitations for passenger automobiles placed in service after December 31, 2017. 

Notice 2018-42 provides that the maximum standard automobile cost may not exceed $50,000 for passenger automobiles (include trucks and vans) placed in service after 2017. 

Unreimbursed employee travel

Notice 2018-03 listed a standard mileage rate of 54.5 cents per mile for business use by taxpayers (including for unreimbursed employee travel expenses as a miscellaneous itemized deduction under section 67). Read TaxNewsFlash

Because of legislative changes made to sections 67 and 217 by the new tax law—that is, measures suspending all miscellaneous itemized deductions that are subject to the 2% adjusted gross income floor for tax years beginning after 2017 and before 2026—the business standard mileage rate cannot be used to claim an itemized deduction for unreimbursed employee travel expenses for that period of years.

Today’s IRS notice further explains that deductions for expenses that are deductible in determining adjusted gross income are not suspended, and that certain taxpayers (for instance, military reservists, state or local government officials paid on a fee basis, and certain performing artists) can continue to deduct unreimbursed employee travel expenses as an adjustment to total income and therefore may continue to use the business standard mileage rate.

Use of automobile, moving purposes

Similarly, the deduction for moving expenses was suspended by the new tax law, so taxpayers (except certain active duty military service members) cannot use the standard mileage rate for the use of an automobile as part of a move.

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