IRS ISSUES GUIDANCE FOR DEDUCTIBLE MOTOR VEHICLE EXPENSES

IRS ISSUES GUIDANCE FOR DEDUCTIBLE MOTOR VEHICLE EXPENSES

 

The Internal Revenue Service recently issued Revenue Procedure 2019-46, which provides guidance for taxpayers with deductible expenses of operating a motor vehicle for business, charitable, medical, and moving expenses. This clarification was made necessary by changes made by the Tax Cuts and Jobs Act (TCJA). RP-2019-46 does not require taxpayers to use a certain method of tracking expenses only that adequate records are maintained that support such expenses.

RP 2019-46 provides rules to substantiate ordinary and necessary travel expenses that an employer reimburses using the optional standard mileage rates. The IRS prospectively adjusts the standard mileage rates for business, medical, and moving expenses annually and publishes them in an annual notice.

The term “standard mileage rate” means the amount the IRS provides for optional use by taxpayers to substantiate the amount of, the deductible costs of operating for business purposes automobiles, including vans, pickups, or panel trucks, they own or lease, and the deductible costs of operating automobiles for charitable, medical, or moving expense purposes.

A taxpayer may use the charitable standard mileage rate to compute the charitable contribution deduction for the use of an automobile in rendering gratuitous services to a charitable organization described in § 170. A taxpayer may use the medical standard mileage rate to compute the deduction for the use of an automobile as medical care under § 213.

For any taxable year during the suspension period, a taxpayer is not permitted to claim miscellaneous itemized deductions, including unreimbursed employee travel expenses. However, in computing adjusted gross income, deductions allowed for expenses that are described in § 62(a) are not miscellaneous itemized expenses and are therefore not suspended. An experienced tax professional can help clarify those expenses for which deductions are suspended under the TCJA.

The TCJA also amended the Tax Code to require taxpayers to reduce the basis of an automobile used in business by the greater of the amount of depreciation claimed for the automobile or the amount of depreciation allowable. If a taxpayer uses the business standard mileage rate to compute the expense of operating an automobile for any year, a per-mile amount is treated as the depreciation claimed by the taxpayer and the depreciation allowable for those years in which the taxpayer used the business standard mileage rate.

If you have any questions about certain deductible expenses based on changes made by the Tax Cuts and Jobs Act (TCJA), call The Gartzman Law Firm at (770) 939-7710. Use our contact form to request a consultation with an Atlanta tax resolution attorney.

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