Tax penalties increased for inflation in 2019
Tesla buyers' tax break will be reduced in 2019 — if the federal tax credit is continued

Mileage tax deduction rates for 2019 bumped up a bit


Welcome to Part 10 of the ol' blog's 2019 series on tax inflation adjustments. 
This final part of the annual inflation tweaks focuses on vehicle mileage rates.
You can find links to all 2019 inflation posts
in the 
series' first item: income tax brackets and rates.
Note: The 2019 figures apply to 2019 returns that are due in April 2020.
For comparison purposes, you'll also find 2018 amounts to be used
in filing this year's 2018 tax return due April 15, 2019.

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If your job requires you to be on the road, you'll get a bit bigger tax break for those business miles in 2019.

The Internal Revenue Service's annual adjustment of the optional standard mileage rate for business use of your vehicle is 3.5 cents per mile more next year.

The deductible per-mile rate for medical and moving also goes up. It's 2 cents per mile higher in 2019.

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.

2017 & 2018 standard mileage deduction rates
allowed on cents-per-mile basis

Tax Year

Business

Medical

Moving

Charity

2019

58

20

20

14

2018

54.5

18

18

14


Medical deduction help: The increased allowance for medical-related travel will help taxpayers who plan to claim allowable itemized expenses on Schedule A.

This write-off, the first category on the itemized expenses schedule, was left unchanged by the Tax Cuts and Jobs Act (TCJA).

For the 2019 tax year, to claim these doctor et al costs, you'll need to accumulate a total that's more than 10 percent of your adjusted gross income adjusted gross income (AGI). 

2018 filing note: The drop to 7.5 percent of medical expense deductions is in place through the 2018 tax year, meaning that's the AGI cut-off for your tax return due in April 2019. But it returns to the Affordable Care Act (Obamacare) mandated 10-percent threshold starting with the 2019 tax year.

The increase in eligible driving connected to medical treatments (and, in some instances, conferences) could help you clear the increased 2019 deductibility threshold.

Moving expenses also limited by tax reform: The write-off for moving mileage also should help those eligible to claim this above-the-line tax deduction.

But fewer taxpayers can claim moving expenses now due to changes under the TCJA. Civilians who move for new jobs no longer can claim these expenses.

The tax reform bill now limits the relocation deduction, at least through the 2025 tax year, to U.S. Armed Forces personnel who are on active duty and who move pursuant to a military order related to a permanent change of station.

Business mileage deduction choice: Many business taxpayers use the standard rate when figuring how much in mileage costs they can claim.

But note that you always have the option of calculating the actual cost of using your vehicle rather than using the standard mileage rates.

The mileage deduction choice, like every other tax decision, depends on your personal situation.

In most instances, it's a no-brainer to use the one that will give you more tax savings. Some filers, however, find convenience is more valuable, especially if the tax-saving difference is, from your perspective, negligible.

Make your choice wisely, especially if you're claiming the business mileage rates for the first time. The IRS points out that you can't 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.

Basically, the upshot is that if you initially opt for the actual expenses method, you're stuck with it for as long as you use that vehicle.

This and other limitations, such as the number of simultaneously-used vehicles for which the standard rate can be used, are described in section 4.05 of Rev. Proc. 2010-51. That IRS document also gets today's Saturday Shout Out.

Yeah, it is a bit of dry reading, but if you're a business owner it could help you make the best vehicle deduction moves.

And if you'll still confused, don't worry. Your tax preparer or software can help.

Why the mileage rates differ: The 2019 increases are the largest in recent years, thanks to this year's larger inflation rate.

So why didn't the medical and moving standard rates go up as much as the one for business-related driving?

The IRS notes that 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.

Those different vehicular cost categories account for the differences in the rates.

Hitting the inflation highway: The annual mileage rate tweaks the IRS announced on Dec. 14 technically aren't part of the agency's overall inflation adjustments that are put out in two major announcements, generally each fall.

But the mileage rate adjustments merge nicely into that changing tax amounts roadway.

Their final spot in the 10-part inflation series also offers a look at the vehicular deduction amounts available to claim in the rapidly winding down 2018, as well as for planning in the upcoming 2019 tax year.

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