The IRS has released guidance that updates Rev. Proc. 2010-51, I.R.B. 2010-51, 883 to reflect changes made to Code Secs. 67 and 217 by the Tax Cuts and Jobs Act (TCJA) ( P.L. 115-97). Rev. Proc. 2010-51 provides rules for using the standard mileage rates when calculating the deductible expenses of operating a vehicle for business, charitable, medical, or moving expense purposes.
The TCJA suspended the miscellaneous itemized deduction for tax years beginning in 2018 through 2025. Thus, during the “suspension period,” an individual may not claim any miscellaneous itemized deduction subject to the two-percent-of-AGI-limit. These expenses include unreimbursed business expenses such as the cost of operating a vehicle for business purposes.
Modifications to Rev. Proc. 2010-51
In order to reflect the amendments made by the TCJA, Rev. Proc. 2019-46 makes a number of modifications to Rev. Proc. 2010-51. Specifically, Rev. Proc. 2019-46 clarifies that, during the suspension period, taxpayers may not claim miscellaneous itemized deductions:
- for expenses using the standard mileage rate;
- for parking fees and tolls ascribed the business use of a vehicle;
- for unreimbursed travel expenses;
- for moving expenses, unless the taxpayer is a member of the Armed Forces on active duty;
- for the difference between an employee’s actual expenses and substantiated expenses, when the substantiated expenses are less than the actual amount; and
- when using the fixed and variable rate (FAVR) allowance, for parking fees and tolls attributable to the employee driving the standard automobile in performing services as an employee.
However, taxpayers who pay or incur deductible unreimbursed employee travel expenses may use the standard mileage rate during the suspension period to compute their deduction.
In addition, under the new guidance, any amounts paid under a mileage allowance to an employee are treated as paid under a nonaccountable plan. This is the case regardless of whether the employee incurs a deductible business expense.
Rev. Proc. 2019-46 also modified Rev. Proc. 2010-51 to explain the reduction of basis on vehicles for depreciation purposes. Specifically, taxpayers must reduce the basis of a vehicle used in business by the greater of either the amount of depreciation claimed for the vehicle or the amount of depreciation allowable. If a taxpayer uses the standard mileage rates to calculate the deductible costs of operating a vehicle, a per-mile amount is treated as the depreciation claimed by the taxpayer.
The guidance also provides rules for substantiating the amount of an employee’s ordinary and necessary travel expenses reimbursed by an employer using the optional standard mileage rates.
Rev. Proc. 2019-46 is effective for:
- deductible transportation expenses paid or incurred on or after November 14, 2019; and
- mileage allowances or reimbursements (a) paid to an employee or to a charitable volunteer on or after November 14, 2019, and (b) for transportation expenses the employee or charitable volunteer pays or incurs on or after November 14, 2019.