The Tax Blotter – New Year’s Eve Edition

Although you can’t deduct the cost of commuting back and forth from work, the tax law provides various benefits associated with driving your vehicle. Following are some new developments affecting mobile taxpayers.

More tax mileage in ‘19.

The IRS recently announced new optional standard mileage rates for 2019 (IR-2018-251, 12/14/18). Accordingly, the rate for business driving was hiked 3.5 cents to 58 cents per mile; the rate for medical and moving expense mileage was bumped up 2 cents to 20 cents per mile; and the rate for charitable travel, which is set by Congress, remained at 14 cents per mile. Plus, you can add on related tolls and parking fees. Note: Taxpayers may still generate bigger write-offs by keeping track of their actual expenses.

Losing the tax connection.

The IRS also indicated that Telsa sold more than 200,000 plug-in electrical vehicles in the third quarter of 2018 (IR-2018-252, 12/14/18) As a result of this event, as required by law, the $7,500 tax credit for Tesla plug-ins bought in 2019 will be phased out in stages. For purchases made after December 31, 2018, the credit is reduced to $3,750, followed by a reduction to $1,875 for Teslas acquired after June 30, 20219. But credits are still available for buying other qualified vehicles that meet the IRS’ standards.

Pile on “bonus” depreciation.

Under the Tax Cuts and Jobs Act (TCJA), a taxpayer buying a new vehicle for business driving after 2017 may tack on an $8,000 bonus depreciation amount to the increased Section 179 limit for “luxury cars.” Therefore, for a passenger vehicle placed in service in 2018, the total first-year deduction could be as high as $18,000, based on 100% business use. The $8,000 add-on for bonus depreciation provided by the TCJA won’t change for 2019, but that’s still a pretty good deal for taxpayers who buy vehicles for business travel this year.

By |2018-12-31T14:30:27+00:00December 31st, 2018|Personal Finance|0 Comments

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