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Compliance Briefing Center

Legislation and Reform

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Suspension of Miscellaneous Itemized Deductions

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Notice 2018-03, released December 14, 2017, provided the optional 2018 standard mileage rates for taxpayers to use in computing the deductible costs of operating an automobile for business, charitable, medical, or moving expenses. The standard mileage rates include a rate of 54.5 cents per mile for business use and 18 cents per mile for eligible moving expenses. Those rates haven’t changed, but the ability to deduct business and moving mileage has changed.

Recently-released Notice 2018-42 modifies Notice 2018-03 by drawing attention to a suspension of miscellaneous itemized deductions outlined in the Tax Cuts and Jobs Act (TCJA).

TCJA suspended all miscellaneous itemized deductions that are subject to the two-percent of adjusted gross income floor, including unreimbursed employee travel and moving expenses. This TCJA suspension applies to taxable years beginning after December 31, 2017, and before January 1, 2026.

The business standard mileage rate cannot be used to claim an itemized deduction on an individual’s tax filing for unreimbursed employee travel expenses during the suspension. There are certain exceptions to the unreimbursed mileage deduction.

For example, members of a reserve component of the Armed Forces of the United States, state or local government officials paid on a fee basis, and certain performing artists are still entitled to deduct unreimbursed employee travel expenses from their total income.

Moving expenses also may be deductible at the rate of 18 cents per mile under IRC Section 217 for use of an employee’s or person’s car as part of an applicable move. However the suspension of the tax deduction applies for tax years beginning after December 31, 2017, and before January 1, 2026. The moving expense suspension does not apply to members of the Armed Forces of the United States on active duty who move because of a military order or permanent change of station.

TCJA affects other miscellaneous itemized deductions that are subject to the 2 percent of adjusted gross income floor, such as unreimbursed employee expenses for uniforms, union dues, the deduction for business-related meals, entertainment and travel.

The good news? Mileage for qualified medical travel may be reimbursed, at a rate of 18 cents (2018) per mile from taxpayers’ healthcare flexible spending accounts (FSAs), Health Reimburse Arrangements (HRAs) and Health Savings Accounts (HSAs.) Check the relevant plan documents to ensure medical mileage is included as an eligible claims expense.