Auto Standard Mileage Rates and Depreciation Amounts Updated

The IRS has provided information to taxpayers about changes in the use of standard mileage rates and increased depreciation limits for passenger automobiles because of the Tax Cuts and Jobs Act.

The IRS modified Notice 2018-03, which provided the optional 2018 standard mileage rates for taxpayers to use in computing the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes.

Because the TCJA suspended the miscellaneous itemized deduction for unreimbursed employee business expenses from 2018 to 2025, the notice explains that the standard mileage rate will not apply to those expenses during that period.

The next change is to the rate for moving expenses. Notice 2018-03 announced that the rate for 2018 was 18 cents per mile. The TCJA repealed the moving expense deduction for individual taxpayers from 2018 to 2025, except for U.S. armed forces members on active duty who move pursuant to a military order and incident to a permanent change of station to whom Sec. 217(g) applies.

The final change is to the depreciation allowances permitted pre- and post-TCJA. Under pre-TCJA law, under a fixed-and-variable-rate (FAVR) plan, the maximum standard automobile cost was $27,300 for 2018 for automobiles (not including trucks and vans) and $31,000 for trucks and vans. (Under a FAVR plan, a standard amount is deemed substantiated for an employer’s reimbursement to employees for expenses they incur in driving their vehicle in performing services as an employee for the employer.)

Section 13202 of the TCJA increased the depreciation limits for passenger automobiles placed in service after Dec. 31, 2017. As a result, the maximum standard automobile cost is raised to $50,000 for passenger automobiles, (including trucks and vans) placed in service after Dec. 31, 2017. Unlike the other TCJA changes discussed here, this increase is permanent.