IRS: Updated Mileage Reimbursement Rates

The IRS recently issued Notice 2018-42, which reflects recent changes due to the Tax Cuts and Jobs Act. Please consider the guidance below to determine whether the changes impact your operations. Notably, the new notice makes important changes to Notice 2018-3, issued earlier in the year, and suspends some of its deductions.

Moving Expenses

Notice 2018-3 provided for a mileage rate of 18 cents for moving expenses. This deduction for moving expenses is suspended until January 1, 2026, except for active duty members of the military who moved pursuant to orders.

Unreimbursed Employee Expenses

Notice 2018-3 allowed a taxpayer deduction for unreimbursed employee travel expenses, stating that taxpayers could use the standard mileage rate (54.5 cents per mile).

The new notice suspends all miscellaneous itemized deductions that are subject to the two percent of adjusted gross income floor until January 1, 2026, including unreimbursed employee travel expenses. Notice 2018-3 can no longer be used to claim this deduction, except in the case of:

  • Military service-members on reserve status;
  • State or local government officials paid on a fee basis; and
  • Some performing artists.

Depreciation Limits for Passenger Vehicles

The new notice increases the depreciation limitations for passenger automobiles placed in service after December 31, 2017, such that the new maximum standard automobile cost may not exceed $50,000 for passenger cars, trucks, and vans which came into service after December 31, 2017.