I'm a part time delivery driver for Waitr.
I am a W2 employee paid $5 hourly + Tips.
Waitr reimburses no mileage expenses.
Can I still claim mileage as a deduction on business miles since the itemized deductions have been eliminated. Yes or No?
I've done plenty of delivery and courier jobs over the years, but I have always been a 1099. This is the first year I am working a job with a W2 status and driving my own vehicle from work, and I keep getting different answers from everyone that I ask about mileage deductions for 2018 and beyond, and I am having a hard time interpreting the new tax reform.
I am aware I cannot claim to mileage to and from work, so this year in my mileage log I have been starting my log book when I reach the boundary of my company's delivery zone, and finishing that mileage log when I am leaving the zone at the end of my shift.
Could someone please enlighten me a little bit?
As a W-2 employee, Starting Jan 1 2018 you will have no claim to mileage on your personal car used in your employment by a business you do not own, as an itemized deduction on SCH A. https://www.irs.gov/pub/irs-drop/n-18-42.pdf So if your employer reimburses you on a per-mile basis, that reimbursement amount is included in box 1 of your W-2 and is taxable income.
Thank you for the response, Carl.
A coworker was told by H&R Block that she could claim mileage, but only if the car was used for business and nothing else. Another coworker was told by his accountant that he could claim mileage or the standard deduction, which has been true for 1099s, but not W2s, even prior to the tax reform. There is so much misinformation at my workplace, and management just keeps telling us that it's our job to do our own research.
Seems my link above is no longer valid with a "page not found" error. Hmmmmm. Anyway, it's summarized on the IRS website at https://www.irs.gov/newsroom/law-change-affects-moving-mileage-and-travel-expenses.
Now there's a link on that page to IRS Notice 2018-03. Click that link and start reading Notice 2018-03. I've copied below the part that applies to you.
Public Law 115-97 (section 11045) suspends all miscellaneous itemized deductions that are subject to the two-percent of adjusted gross income floor under § 67, including unreimbursed employee travel expenses. This suspension applies to taxable years beginning after December 31, 2017, and before January 1, 2026.
Thank you for the prompt response, Carl.
Would anyone from the community have any advice for W2 delivery drivers such as myself, since even those of us who are reimbursed, that reimbursement from our respective companies would be considered taxable income. (I'm still trying to comprehend how that is not theft on the part of the federal government.)
Even at Waitr, most of us working full time average 2500 - 3000 miles monthly, which, at the end of the year, well exceeds the standard deductions, even if those deductions are now doubled.
I'll ask again: what advice would the community give us? Should we all just quit our jobs? Because that is starting to seem like the only logical choice for many of us.
While waiting for others to jump into this thread, let me provide you a bit more if I may.
I seriously doubt you will see any difference in your taxes because of the inability to deduct mileage as a W-2 employee. One rule that has not changed is this:
- Until your unreimbursed employee expenses exceed 2% of your AGI, *AND* the total of all your itemized expenses on SCH A exceed your standard deduction, your SCH A itemized deductions do not kick in and do not count for anything. If the standard deduction would be higher than your itemized deductions, the standard deduction takes precedence . So while not impossible, it's doubtful that even on your 2017 return that your work related expenses exceeded your AGI on line 21 of the 1040A or line 37 of the 1040. Now if you filed single for 2017, it is possible that all of your itemized deductions on SCH A exceeded your standard deduction of $6,350. As a part timer at $5/hr that's only $10,400 a year figured on a full time 40 hour work week. I'm sure that's not your only source of income too. But even so, 2% of $10,400 is $208 and while your work related expenses may exceed your AGI, I just can't see the total of all your SCH A itemized deductions exceeding your standard deduction.
Now that was for 2017. Tax year 2018 is a whole new ballgame.
First, your standard deduction filing single is $12,000 and you get no personal exemption. So if you don't have more than $12,000 in itemized deductions on SCH A, don't bother itemizing anything. You'd just be wasting your time.
Here's a synopsis of things between 2017 and 2018.
Many are upset with the current tax changes as passed by congress and signed into law by President Trump, which kicked in on Jan 1, 2018. This is understandable for those that have children. Without the changes in 2018 you would have been able to deduct $4,100 from their taxable income for each qualified dependent. But for those that have only one or two children, they haven't done the math, and therefore believe it won’t make a positive impact. But looks can be (and are in this case) deceiving. Let’s look at the math both ways, starting with the old way which we’d be doing had the changes not passed. Let’s use a married couple filing a joint return with two children, one age 11 the other age 17 on Dec 31 of 2018.
The old way:
For a married couple filing joint, their standard deduction is $12,800. Then each parent also gets a $4,100 personal exemption bringing the total of tax free income thus far to $21,000. Now add to that a dependent exemption of $4,100 for each child bringing the final total to $29,200 that our family of four can deduct right off the top of their taxable income.
The new way:
Same married couple with same two children now only gets a $24,000 standard deduction for a married couple filing joint. That’s it. So this couple will be taxed on an additional $5,200. Yeah, that sucks I know, and I agree. But do the math and you’ll be quite pleasantly surprised. You have to look at the new tax rate and tax bracket structure too, because that plays into this quite heavily.
Let’s consider in our two examples above that the combined gross income of both parents was $160,000 for the tax year.
With the deductions outlined above under the old way, they would be in the 28% tax bracket. The taxable income after the standard deduction and dependent exemptions would be $130,800. Tax liability on that taxable income would be $29,606
Under the new way the parents are in the 22% tax bracket. They can only deduct the standard deduction of $24,000 from their $160,000 gross income, bring their taxable income to $136,000. Their tax liability in the new lower 22% tax bracket will be $21,799.
That’s a tax savings of $7,807 in *FAVOR* of the taxpayer.
Thank you again, Carl!
The next time I'm hanging around a parking lot having small talk with one of the local pizza delivery drivers, I'll reference this thread.
I guess we'll see how the mileage, wages and tips work out at the end of the year on my spreadsheets. I've been a 1099 courier on and off for almost 10 years, but never as a W2 employee. With this 2018 reform I'm getting a lot thrown at me that, thus far, has made little sense to me as well as other drivers.
Some things I left out on purpose, because it just doesn't apply to you, is that under the new law the married couple still gets the child tax credit for the 11 year old, since they're under the age of 13, but not for the 17 year old since they're over the age of 12. This rule has not changed, but I don't know if the amount of the credit has changed or not. There's quite a lot that's in the bill passed by congress. But the IRS hasn't yet updated their pubs so as to make the law more comprehendible to us common folks. I'm sure the IRS has pub writers working non-stop on this, just as I'm sure tax prep software companies like Intuit are waiting for those pubs with baited breath.