What Does the New Tax Law Mean for Driver's Reimbursements?
The new tax law impacted businesses, providing cuts to corporations and increasing exemptions from the estate tax. The new law also changes what can be claimed as deductible. In a previous post we shared how it will now affect the taxation process of certain business vehicle programs. But what does it mean to the participants?
In legalese, the new TCJA tax law has suspended miscellaneous itemized deduction of unreimbursed business expenses for employees. In other words, if you previously claimed your mileage as a business expense deduction on your taxes, you can’t do that any longer.
How will this directly impact you? Well, that depends on the reimbursement you’re currently receiving. For example: Joe is a mobile sales rep who receives a $300 dollar allowance every month as a reimbursement for the driving he does for his food and beverage company. While that $300 did not cover the 12,000 plus miles he drives a year, he always wrote-off his business mileage as a business expense during tax season.
Unfortunately, Joe can no longer do this, and without the tax savings from his business expense deduction, the $300 is even less adequate as a reimbursement for all the travel he’s doing. The company that previously told Joe to write off his business travel on his taxes should be looking into a new program, or risk increased employee dissatisfaction and turnover.
Another example: Phillip is a mobile sales rep who doesn’t receive any reimbursement for the driving he does for his pharma company. As he successfully manages his schedule, he’s racking up 20,000 plus business miles a year. He can afford the expense, but it certainly helped to write-off the business expenses in the past, as itemized deductions of more than $10,500 that could have created about $3,000 in tax relief.
Again, Philip can no longer claim his mileage as a business expense deduction, which means he’ll get no tax relief for the expense of driving his car from meeting to meeting. The company that previously told Philip to write of his business mileage should be looking into a new program. Businesses also need to be aware of State labor codes that may require a reasonable reimbursement for business related expenses.
As we stated in our previous post about the impact the tax law has on a company’s business vehicle program, companies with an accountable plan have nothing to worry about and their employees will continue to be reimbursed tax free.
If you have questions about whether the tax law impacts your reimbursement, talk with your supervisor about your business vehicle program.
About the Author
Jake has 10 years of experience in the vehicle reimbursement and fleet management industries. His unique background allows him to help companies and employees benefit from best in class policies, processes, and controls around mobile employee practices. Before Runzheimer, Jake worked with a leading fleet management company and auto physical damage software firm in Southern California.More Content by Jacob Ernest