Feeling lost while navigating the new Tax Cuts and Jobs Act (TCJA) changes for business travel, parking and relocation? You’re not alone. Here are some of the top changes and what the IRS has to say (if anything) about them.
The standard mileage rates for business use of a vehicle increased significantly in 2019 – from 54.5 cents (in 2018) to 58 cents. Historically, taxpayers used the optional standard mileage rates to calculate the unreimbursed costs of operating a car, van, pickup truck, or panel truck for work.
However, there’s now a catch.
TCJA suspended the miscellaneous itemized deductions including unreimbursed employee business expenses from 2018 to 2025. This includes the use of the standard mileage rate deduction for all employees but an exception was created for a select group of taxpayers, which includes reserve members of the U.S. military, state and local government officials paid on a fee basis, and certain performing artists. Read more here.
Per Diem Rates
Per diem rates and locations considered high-cost localities have changed slightly for 2019, which is expected from year to year. You can check out those details here. What’s markedly different, however, is how the miscellaneous itemized deduction removal and other TCJA changes have affected per diem travel.
Tax professionals are still working out the many small ways in which the loss of the miscellaneous itemized deduction for unreimbursed business expenses affects employees who are reimbursed on a per diem basis. One option to consider might be a change in the employer’s travel reimbursement policy. Forbes’ Kelly Phillips Erb points out per diem changes to note here.
TCJA has introduced significant changes in the way employee parking expenses can be deducted. The IRS issued interim guidance late last year pointing out that the new nondeductible amount first hinges on whether you (as the employer) pay a third-party to provide parking spots or you own or lease your own parking facilities. Then, the guidance offers four steps that can help you determine how much of your employee parking expenses are no longer deductible.
The guidance still leaves plenty of room for confusion, which is likely why the IRS states that “taxpayers may rely on the guidance or, until further guidance is issued, use any reasonable method for determining nondeductible parking expenses related to employer-provided parking.”
Relocation and Moving Costs
You can no longer expect the IRS to pitch in to cover the cost of moving for a job or relocating an employee (unless they’re active U.S. military). Moving expenses are no longer tax deductible through 2025 and, furthermore, employers need to include moving expense reimbursements as taxable income in the employees’ wages. A transition rule does apply if the employee moving costs you paid in the past year were for expenses incurred before 2018.
If you incur unreimbursed travel, business, or transportation expenses on prior tax returns, expect to spend some extra time this year with your employer dealing with this issue. For questions, feel free to contact us.