At the start of 2018, Congress approved the most significant set of changes in over three decades to our existing U.S. tax law. If you are one of the millions of Americans who have previously claimed deductions related to utilizing your vehicle for business purposes, it is a good time to check in to see how these new changes may impact those deductions – or check in with an expert who is experienced with the new tax law.
Whether you are self-employed, or a business owner of any kind, there is a good chance your car has qualified for business-use related deductions on your past tax filings. With the Tax Cuts and Jobs Act or the TCJA, this could mean good news for some, and bad news for others.
With two ways to calculate your business vehicle deduction amounts, you will have to determine what works best for you – using actual expenses incurred (such as depreciation, lease payments, gas, maintenance, insurance, and even registration) or using the standard mileage rate. The new law allows for a significantly increased depreciation allowance – including a first-year 100% value deduction – so it’s a good time to check with a tax expert to help you recalculate what works best for you.
Now for the bad news. The new TCJA laws eliminated employee deductions for unreimbursed vehicle expenses you may have incurred at your job. Essentially, this means that an employee of a company can no longer claim deductions for unreimbursed business-usage vehicle expenses.
While it can be complicated and tedious, it is important to fully understand the tax implications related to mileage deductions, buying versus leasing and depreciation of your vehicle. Special rules for business vehicles can deliver healthy tax savings but remember – if you also use your vehicle for personal use, you must split the deduction accordingly. To make sure you are getting the most out of your business vehicle-related deductions, Optima Tax Relief, an expert in tax resolutions, suggests consulting with a professional who can help you easily navigate what impact these changes in tax law might mean for you come tax time.