Deductible transportation expenses fall into four main categories: business, charitable, medical and moving expenses. Some transportation costs that were deductible in 2017 may not be deductible or may be limited in 2018.
Deductible transportation costs are significantly different between tax years 2017 and 2018.
Once you’ve determined whether your transportation costs are deductible, you need to decide what method to use. You can calculate deductions based on the actual operating costs of your vehicle or use the IRS’s standard mileage rates.
The actual operating cost method involves figuring out what it cost you to operate your vehicle for the deductible activity. Gas, oil, insurance, registration fees and a portion of depreciation can all come into play. As always, keep good records to support any deductions you take.
Understanding Deductions and Exceptions
Commuting to and from your job is not deductible. But the cost of going from one workplace to another can be. If you usually work from home for your employer, but sometimes travel to another workplace, the cost of doing so may be deductible.
The same rules apply to public transportation. Even if you work while you’re commuting to your job by bus, train or ferry there is no public transportation tax deduction. You also can't deduct any transportation costs that your employer reimbursed you for.
If you’re going to take a deduction for transportation costs related to charitable work and you want to use the actual costs method, you can deduct gas and oil but not repairs, maintenance, registration fees or insurance. To take this deduction, your involvement in the charitable activity cannot be minimal. You have to have been on duty in a “genuine and substantial sense throughout the trip,” according to the IRS.
Deducting transportation expenses at actual cost for driving to and from medical appointments is similar. You can include out-of-pocket costs like gas and oil, but you cannot include depreciation, insurance, repairs or maintenance. Parking fees may also be deductible.
If you used your car to move, the last year to deduct the costs is 2017. If you opt to use the actual costs method, you cannot include general repairs or maintenance, insurance or depreciation. If you’ve moved to a different state during any tax year, you cannot deduct the costs of registering your vehicle there or getting a new driver’s license.
Transportation Costs Deductions for 2018
The Tax Cuts and Jobs Act made some major changes to transportation expense deductions, as well as deductions in general. The standard deduction that everyone is entitled to increased dramatically for the 2018 tax year. Single taxpayers will be able to take a $12,000 standard deduction, single heads of households can take $18,000 and married couples filing jointly can take $24,000.
These higher standard deductions replace the combination standard deduction plus personal exemption each taxpayer used to get. For example, in 2017, a single taxpayer with no dependents was entitled to a standard deduction of $6,350 plus one personal exemption of $4,050. However, starting with the 2018 tax year, the same taxpayer only gets the standard deduction of $12,000. It only makes sense to itemize if your total deductions are higher than your standard deduction. These higher standard deductions make thresholds for itemizing much higher. And that’s not all.
Beginning with tax year 2018, you can no longer deduct moving or unreimbursed employee business expenses. That includes transportation costs for these activities. There is an exception to deducting moving costs if you’re on active military duty and had to move per military orders.
Deductions for charitable contributions, which include transportation for charitable activities, survived tax reform. So did qualified medical expenses as long as they’re more than 7.5 percent of your adjusted gross income (starting with the 2019 tax year, it increases to 10 percent). But again, your total deductions have to exceed your standard deduction in order to itemize, and you can only take these deductions if you itemize.
Alternatively, you can use the IRS’s per-mile reimbursement rates for 2018. They are 54.5 cents for business miles, 18 cents for medical or moving miles and 14 cents for charitable work miles. Other vehicle-related expenses like parking fees and tolls may also be deductible. These costs can be deducted regardless of which method you use to calculate your transportation deduction.
Also new for the 2018 tax year is a completely redesigned Form 1040. The new Form 1040 is still in draft form but it looks like it will be about half the length of the old one. It’s supposed to replace the old Forms 1040, 1040-A and 1040-EZ. The idea is to get more taxpayers using the same form and supplementing it with schedules as needed.
Transportation Costs Deductions for 2017
There are no limits to how much you can deduct in business and moving expenses for 2017 but be aware that the chances of being audited increase along with the amount you deduct. For the 2017 tax year, you can only deduct the portion of your medical and dental expenses that were over 7.5 percent of your adjusted gross income.
Generally, charitable contribution deductions, which could include transportation, cannot be more than 50 percent of your adjusted gross income. There are a couple exceptions to this limit. See the IRS’s Publications 525 for business expenses and 526 for charitable contributions, or talk to your professional tax preparer for more information.
The IRS’s per-mile reimbursement rates for 2017 are 53.5 cents for business miles, 17 cents for medical or moving miles and 14 cents for charitable work miles. Other vehicle-related expenses such as parking fees and tolls may also be deductible. These costs can be deducted regardless of which method you use to calculate your transportation deduction.
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