The IRS has issued Rev. Proc. 2019-46
to modify guidance under Rev. Proc. 2010-51 for using optional standard mileage rates in computing the deductible costs of operating an automobile for business, charitable, medical or moving expense purposes. The modifications reflect certain statutory changes such as the temporary suspension of miscellaneous itemized deductions for 2018 through 2025 (the suspension period) and the substantiation rules for travel and transportation expenses reimbursed using a mileage allowance.
The Tax Cuts and Jobs Act of 2017 (TCJA) suspended all miscellaneous itemized deductions subject to the 2% of adjusted gross income (AGI) floor, including unreimbursed employee travel expenses, for taxable years 2018 through 2025. TCJA also suspended the deduction for moving expenses for those same years. However, the suspensions do not apply in certain circumstances.
Rev. Proc. 2019-46 modifies Rev. Proc. 2010-51 in regards to the following notable items:
- Taxpayers cannot use the business standard mileage rate to claim a miscellaneous itemized deduction during the suspension period, including for unreimbursed travel expenses.
- Miscellaneous itemized deductions may not be claimed for parking fees and tolls attributable to automobile use for business purposes.
- Depreciation used in calculating a basis reduction of an automobile used for business are adjusted.
- Employee travel expenses that are deductible in computing AGI instead of as an itemized deduction, such as under a reimbursement arrangement or for specified professions, may use the business standard mileage rate, but cannot claim an itemized deduction for any unsubstantiated amounts
- 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.
Rev. Proc. 2019-46 also provides substantiation rules regarding the amount of an employee’s ordinary and necessary expenses of local travel or transportation away from home that a payor (an employer, its agent, or a third party) reimburses using a mileage allowance. However, these methods are not required to be used and actual allowable expense amounts may be substantiated instead if the taxpayer maintains adequate records or other sufficient evidence.
Rev. Proc. 2019-46 is effective for deductible transportation expenses and specified mileage allowances, reimbursements, or transportation expenses paid or incurred after Nov. 13, 2019.
Partner, Washington National Tax Office
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