Vehicle expense deduction for individual taxpayers

The good news is that it’s not just businesses that can deduct vehicle-related expenses. Vehicle expense deduction for taxpayers also can deduct them in select circumstances. The bad news is the Tax Cuts and Jobs Act (TCJA) might reduce your deduction compared to what you claimed on your 2017 return.

For 2017, miles driven for business, moving, medical and charitable purposes were potentially deductible. For 2018 through 2025, business and moving miles are only deductible in limited circumstances. TCJA changes could also affect your tax benefit from medical and charitable miles.

Current limits

Before 2018, if you were an employee, you could potentially deduct business mileage not reimbursed by your employer as a miscellaneous itemized deduction. However, the deduction was subject to 2% of your adjusted gross income (AGI) floor, which meant that mileage was deductible only to the extent that your total miscellaneous itemized deductions for the year exceeded 2% of your AGI. For 2018 through 2025, you can’t deduct the mileage regardless of your AGI because the TCJA suspends miscellaneous itemized deductions subject to the 2% floor.

If you’re self-employed, business mileage is deducted from self-employment income. Therefore, it’s not subject to the 2% floor and is still deductible for 2018 through 2025, if it qualifies.

Miles driven for a work-related move in 2017 were generally deductible “above the line” (itemizing that wasn’t required to claim the deduction). Currently, for 2018 through 2025, moving expenses are deductible only for certain military families.

Miles driven for health-care related purposes are deductible as part of the medical expense itemized deduction. Under the TCJA for 2017 and 2018, medical expenses are deductible to the extent they exceed 7.5% of your AGI. For 2019, the floor returns to 10%, unless Congress extends the 7.5% floor.

The limits for deducting expenses for charitable miles driven haven’t changed, but keep in mind that you can only claim the deduction if you itemize. For 2018 through 2025, the standard deduction has nearly doubled. Depending on your total itemized deductions, you might be better off claiming the standard deduction, in which case you’ll get no tax benefit from your charitable or medical miles, even if you exceed the AGI floor.

Planned mileage rates

Rather than keeping track of your actual vehicle expenses, you can use a standard mileage rate to compute your deductions. The rates differ depending on the mileage purpose and the year:

  • Business: 54.5 cents (2018), 58 cents (2019)
  • Medical: 18 cents (2018), 20 cents (2019)
  • Moving: 18 cents (2018), 20 cents (2019)
  • Charitable: 14 cents (2018 and 2019)

In addition to deductions based on the standard mileage rate, you may deduct related parking fees and tolls. There are also substantiation requirements, which include tracking miles driven.

Get help

If you have questions about vehicle expense deduction for taxpayers, contact us. We can help you with your 2018 return and 2019 tax planning. 

CAPATA is a full-service accounting firm located in Laguna Niguel in southern California.