Individuals can deduct some vehicle-related expenses in certain circumstances. Rather than keeping track of the actual costs, you can use a standard mileage rate to compute your deductions. For 2017, you might be able to deduct miles driven for business, medical, moving and charitable purposes. For 2018, there are significant changes to some of these mileage deductions under the Tax Cuts and Jobs Act (TCJA).
Mileage Rates Vary
The rates vary depending on the purpose and the year:
Business: 53.5 cents (2017), 54.5 cents (2018)
Medical: 17 cents (2017), 18 cents (2018)
Moving: 17 cents (2017), 18 cents (2018)
Charitable: 14 cents (2017 and 2018)
The business standard mileage rate is considerably higher than the medical, moving and charitable rates because the business rate contains a depreciation component. There is no depreciation allowed for the medical, moving or charitable use of a vehicle. The charitable rate is lower than the medical and moving rate because it isn’t adjusted for inflation.
In addition to mileage deductions based on the standard mileage rate, you may deduct related parking fees and tolls.
2017 and 2018 Limits on Mileage Deduction
The rules surrounding the various mileage deductions are complex. Some are subject to floors and some require you to meet specific tests in order to qualify.
For example, if you’re an employee, you may only deduct business mileage not reimbursed by your employer. It’s a miscellaneous itemized deduction subject to a 2% of adjusted gross income (AGI) floor. For 2017, this means you may only deduct mileage to the extent that your total miscellaneous itemized deductions for the year exceed 2% of your AGI. For 2018, it means that you can’t deduct the mileage, because the TCJA suspends miscellaneous itemized deductions subject to the 2% floor for 2018 through 2025.
If you’re self-employed, you can deduct business mileage against self-employment income. Therefore, it’s not subject to the 2% floor and you may still deduct it for 2018 through 2025, as long as it otherwise qualifies.
You may deduct miles driven for health-care-related purposes as part of the medical expense deduction. And an AGI floor applies. Under the TCJA, for 2017 and 2018, you may deduct medical expenses to the extent they exceed 7.5% of your adjusted gross income. For 2019, the floor will return to 10%, unless Congress extends the 7.5% floor.
And while you may deduct miles driven related to moving on your 2017 return, the move must be work-related and meet other tests. For 2018 through 2025, under the TCJA, only certain military families may deduct moving expenses are deductible only for certain military families.
Substantiation and More
There are also substantiation requirements, which include tracking miles driven. And, in some cases, you might be better off deducting actual expenses rather than using the mileage rates.
We can help ensure you deduct all the mileage you’re entitled to on your 2017 tax return. But don’t risk back taxes and penalties later for deducting more than allowed. Contact us for assistance and to learn how your mileage deduction for 2018 might be affected by the TCJA.