U.S. Internal Revenue Service Updates Standard Mileage Guidance for 2018

The United States Internal Revenue Service (IRS) has issued a Notice conforming its 2018 guidance on the use of standard mileage rates to the Tax Cuts and Jobs Act of 2018 (TCJA).

The standard mileage rate for business use of an automobile stays at 54.5 cents per mile. Business travelers can use that optional rate in lieu of accounting for specific costs of operating a vehicle.

However, the new Notice implements other changes made by the TCJA that affect deductions for automobile use. 

  • Unreimbursed automobile costs are no longer deductible as itemized deductions, so the standard mileage rate is inapplicable.
  • The 18 cents per mile rate for use of a vehicle in moving is removed because moving expenses are no longer deductible, except for certain members of the active duty military.

The TCJA suspended the deductions for miscellaneous itemized deductions, and moving expenses, through 2025. Previously, there was an allowance for an itemized deduction of miscellaneous business expenses by individuals, to the extent those expenses exceeded 2% of adjusted gross income.

Related: U.S. States Begin to React to Moving Expense Change

How This Will Impact Mobility

Worldwide ERC® members with business travelers who are incurring unreimbursed travel costs, such as automobile use, will need to determine whether to supplement tax assistance to take account of those costs that are no longer deductible. Note that if a company does reimburse automobile costs at the standard rate of 54.5 cents per mile, those reimbursements remain not taxable.

They will also need to consider how to handle automobile use by employees who are moving. Although many will still choose to use the 18 cents per mile rate for reimbursement, those costs are now taxable and subject to gross-up.

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