The Internal Revenue Service has good news for folks who do tax-related driving. Some auto travel amounts, however, might not matter depending on what happens with tax reform.
If your job requires you to be on the road, you'll get a bit bigger tax break for those business miles in 2018.
The Internal Revenue Service's annual adjustment of the optional standard mileage rate for business use of your vehicle is a penny-per-mile more next year.
The deductible per-mile rate for medical and moving also are one cent higher in 2018.
The driving deduction rate for charitable travel, however, doesn't change. It never does. It's stuck at 14 cents per mile. That amount is set by Congressional statute and is not affected by the IRS' annual analysis of vehicular travel.
The table below illustrates which rates apply to this and next year's tax-related travel.
Potential tax reform effects: Before you get too excited (or as excited as you can) about an added penny to 2018 mileage deduction claims, remember that they could be affected by tax reform legislation making its way through Congress as I type.
Business mileage will still be allowed, much to the relief of the millions of self-employed taxpayers who claim their work-related travel on Schedule C.
But if you're a company employee and claim unreimbursed mileage among your other business expenses in the Miscellaneous section of Schedule A, these rates won't matter. That deduction, which admittedly is hard for most folks to claim anyway since it requires you exceed a 2 percent threshold, is axed under the House and Senate tax plans.
The tax change news so far, however, is good for folks who drive in connection with a charity or for medical treatments.
Of course, these changes in both the mileage rates and the overall Internal Revenue Code won't affect our filing until we send in our 1040 forms for the 2018 tax year in 2019. That gives us time to sort out the effects and how the per-mile deductions might apply.
Why the mileage rate differences? While a penny increase is small, the increase for 2018 at least breaks a two-year stretch in which the standard optional deduction amounts went down.
The optional standard mileage rates, aside from the one set for charitable travel, are based on annual studies of the fixed and variable costs of operating a vehicle.
The biggest fixed automotive cost is the vehicle price. The biggest variable cost is gasoline.
The rate for business road travel is based on the both the vehicle's fixed and variable costs.
The rate for medical and moving purposes, on the other hand, is based only on the variable costs.
Rates are optional: Note, too, the rate change's title: optional standard mileage rates.
You have a choice in most cases of how to deduct your allowable driving.
You can use these rates set annually by the IRS. Or, when your driving is for business, you can deduct your actual automotive costs.
While computing the actual cost of using your auto to do business could provide you with a bigger write-off, it does mean more work.
And, notes the IRS, you cannot use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.
Plus, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.
Confused? Don't worry. Your tax preparer or software can help.
But regardless whether you come to your mileage deduction decision on your own or with help, you do need to run an at least down-and-dirty comparison to make sure you use the one that provides the best tax break.
Hitting the inflation highway: The annual mileage rate tweaks the IRS announced this week technically aren't part of the agency's overall inflation adjustments that are put out in two major announcements generally each fall.
When those were issued back in mid-October, I started the ol' blog's annual taxes and inflation series.
But the mileage rate adjustments merge nicely into that changing tax amounts roadway. So they earn the final spot in the 10-part inflation series, closing it out for the 2017 tax year, as well as the rapidly approaching 2018.
This look at changes to standard optional mileage rates
is Part 10 of the ol' blog's series on 2018 inflation adjustments.
You can find links to all 2018 inflation posts in the first item:
Income Tax Brackets and Rates.
Note: The 2018 figures apply to 2018 tax returns that are due in 2019.
For comparison purposes, you'll also find in this post the 2017 amounts
to be used in filing 2017 tax returns due next April.
You also might find these items of interest:
- 17 states now impose some fees on electric autos
- Driving down your tax bill with auto-related deductions
- Trump taking truckers' call for increased gas tax to heart