IRS explains TCJA’s effect on standard mileage rate rules

Editor: Sally P. Schreiber, J.D.

On Nov. 14, the IRS issued guidance updating prior standard mileage rules to reflect provisions of the law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97 (Rev. Proc. 2019-46). The TCJA suspended miscellaneous itemized deductions under Sec. 67 and deductions for moving expenses under 217(a) (except for members of the armed forces on active duty who move pursuant to a military order and incident to a permanent change of station). The suspension is effective for tax years beginning after Dec. 31, 2017, and before Jan. 1, 2026 (suspension period).

Specifically, the revenue procedure adds new provisions and modifies or clarifies existing provisions (Rev. Proc. 2010-51) on the use of the optional standard mileage rate during the suspension period for business (58 cents per mile for 2019), charitable (14 cents per mile), and medical or moving purposes (20 cents per mile for 2019). Rev. Proc. 2010-51 is modified:

• To provide that a taxpayer may not use the business standard mileage rate to claim a miscellaneous itemized deduction during the suspension period;
• To provide that a taxpayer may not claim a miscellaneous itemized deduction during the suspension period for parking fees and tolls attributable to the taxpayer using the automobile for business purposes;
• To provide that, under Sec. 1016(a)(2), a taxpayer must reduce the basis of an automobile used in business by the greater of the amount of depreciation the taxpayer claims 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 (published by the IRS in an annual notice) 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;
• By adding a section to provide that a taxpayer may not use the business standard mileage rate to claim a miscellaneous itemized deduction during the suspension period for unreimbursed travel expenses;
• By adding a section to provide that a taxpayer who pays or incurs unreimbursed employee travel expenses during the suspension period that are deductible by the taxpayer in computing adjusted gross income may use the business standard mileage rate to compute an adjustment to gross income;
• To provide that the deduction for moving expenses during the suspension period does not apply unless the taxpayer is a member of the armed forces on active duty moving pursuant to a military order and incident to a permanent change of station;
• To provide that in using the fixed-and-variable-rate (FAVR) allowance, an employee may not claim a miscellaneous itemized deduction during the suspension period for parking fees and tolls attributable to the employee driving the standard automobile in performing services as an employee;
• By adding a section to provide that if during the suspension period, an employee’s substantiated expenses are less than the employee’s actual expenses, the employee may not claim an itemized deduction for the excess amount;
• To provide that an employee’s amount computed under Section 4 of Rev. Proc. 2010-51 for the business standard mileage rate is an itemized deduction subject to the 2% floor and is not deductible during the suspension period; and
• By adding a section to clarify that amounts paid under a mileage allowance to an employee regardless of whether the employee incurs deductible business expenses are treated as paid under a nonaccountable plan.

The revenue procedure is effective for deductible transportation expenses paid or incurred on or after Nov. 14, 2019, or mileage allowances or reimbursements paid to or transportation expenses paid by an employee or charitable volunteer on or after that date.