The IRS has just announced the standard mileage rates that taxpayers may use for certain driving expenses in 2019 (IR-2018-251, 12/14/18). The rates are generally higher than they’ve been in several years--reaching the second highest rate ever for business drivers, but you still may be better off bypassing this method.
Specifically, the 2019 rates for vehicles, including passenger automobiles, vans, pickups and panel trucks, are as follows:
58 cents per mile for business purposes (up 3.5 cents from 2018);
20 cents per mile medical or moving purposes (up 2 cents from 2018); and
14 cents per mile for charitable purposes.
Add related tolls and parking fees to these amounts. For instance, if someone drives 10,000 business miles in 2019 and incurs $500 in tolls and parking fees, he or she can deduct $5,850 (58 cents x 10,000 + $500).
The 3.5 cents per mile hike for business driving is the largest increase since the standard mileage rate was raised by 4 cents due to rising gas prices during 2011. The 58 cents per mile rate is the second highest on record since it topped out at 58.5 cents per mile in 2008. Also, the 2 cent jump for medical and moving purposes is greater than the change in most years. But the standard mileage rate for charitable driving, which can only be adjusted by Congress, hasn’t budged in decades.
Caveat: Under the Tax Cuts and Jobs Act (TCJA), itemizers can still deduct medical expenses and charitable donations, subject to certain limits, but there is a stronger likelihood that taxpayers will claim the increased standard deduction instead of itemizing.
Also, the TCJA eliminates the deduction for miscellaneous expenses for 2018 through 2025. This category includes unreimbursed employee business expenses like the costs of operating a vehicle for business purposes. Similarly, the moving expense deduction is temporarily eliminated, except for expenses incurred by active-duty military personnel.
Finally, despite the latest increases in the standard mileage rates, you may advise your clients to keep track of all their actual expenses. Generally, this will result in a bigger deduction on their 2019 tax returns, especially for business driving.
Because the TCJA allows generous depreciation deductions for vehicles, including Section 179 deductions and “bonus” depreciation for vehicles placed in service in 2019, many clients will come out ahead by deducting actual expenses. In contrast, depreciation is already built into the standard mileage rate.
Go the extra mile: Figure out the best approach for your clients. Depending on the numbers, you may advise them to switch to the actual expense method for 2019. If a client qualifies, he or she can deduct actual expenses this year, even if the standard mileage rate was claimed for the same vehicle in prior years. At the very least, inform your clients about the new tax rules of the road.
Ken Berry, Esq., is a nationally known writer and editor specializing in tax, financial, and legal matters. During his long career, he has served as managing editor of a publisher of content-based marketing tools and vice president of an online continuing education company. As a freelance writer, Ken has authored thousands of articles for a...