The IRS announced on Friday (Notice 2019-2) that there will be a significant increase in 2019 for the optional standard mileage rates although it has already slightly increased last year. The rate for business use of a car, van, pickup truck, or panel truck was 54.5 cents per mile in 2018, but for 2019 the rate will be 58 cents per mile. The increase is noticeably higher than the previous rate. You can calculate the deductible costs of operating an automobile by using the optional standard mileage rates.
The miscellaneous itemized deduction under Sec. 67 was suspended by the law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97 for 2018-2025 unreimbursed employee business expenses. Claiming a deduction for those expenses during that period will not use the standard mileage rate as explained by the notice.
Members of a reserve component of the U.S armed forces, state or local government officials receiving fees as payments and certain performing artists however will be exempted from that disallowance. They are allowed to deduct mileage expenses on line 24 of Form 1040, U.S. Individual Income Tax Return, (an above-the-line deduction) as well continue using the 58 cents per mile business standard mileage rate.
Furthermore, under Rev. Proc. 2010-51, the standard mileage rate can be used as the maximum amount an employer can reimburse an employee for driving an automobile for the purposes of business transactions or meetings without the need to substantiate the actual expenses incurred.
A deduction of 20 cents per mile under Notice 2019-2 applies on driving for medical care or for certain limited moving expense purposes for members of the armed forces. As you can see, the rate is 2 cents higher than the rate in 2018.
Except for U.S. armed forces members on active duty who move pursuant to a military order and incident to a permanent change of station to whom Sec. 217(g) applies, the moving expenses deduction for individual taxpayers from 2018 to 2025 was revoked by the TCJA.
There were no changes with regards to the rate for service to a charitable organization. It is set by statute at 14 cents per mile (Sec. 170(i)).
The portion of the business standard mileage rate is 1 cent more than 2018. It is treated as depreciation because for 2019, the rate will be 26 cents per mile.
From 2018, a $400 increase was implemented for the maximum standard automobile cost. It is $50,400 for 2019. They will be used to compute the allowance under a fixed and variable rate (FAVR) plan. After the retroactive amendment to the bonus depreciation rules, the FAVR amounts was calculated again last year. For an employer’s reimbursement to employees for expenses incurred in operating their vehicle to perform services as an employee for the employer, a standard amount is deemed substantiated under a FAVR plan.
1. Under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for a vehicle, a taxpayer is not allowed to use the business standard mileage rate for a vehicle after using any method of depreciation. Furthermore, when using more than four vehicles simultaneously, the business standard mileage rate cannot be applied. Section 4.05 of Rev. Proc. 2010-51 will describe these rules and other eliminations.
2. Check out IRS.gov to read more about the Notice 2019-02 that discuss the standard mileage rates, the amount a taxpayer is allowed to use when making calculations to the basis for depreciation taken under the business standard mileage rate. You will also learn more about the maximum standard automobile cost that a taxpayer may use to compute the allowance using a fixed and variable rate plan.
The New Mileage Rates for the year 2019 and the calculations needed to get an accurate result may look and sound confusing to you especially if you’re filing your own tax return for the first time. Consider consulting a trusted Accountant or a Tax Professional to do the calculations for you. They will help in making sure that you’re not making any mistakes thus save money and avoid penalties altogether.
