Unreimbursed business expenses hit a road block
Lafe Myers and David Holland know what it means to be away from home. The two have been driving trucks for nearly 30 years and now drive as a team for Convoy Trucking out of Kansas City, Kansas.
“We leave here on Tuesday, in California on Wednesday, and back here on Thursday,” said Lafe Myers. “If everything goes perfect we are home 48 hours, maybe 50, on a good week.”
Like many drivers, Myers and Holland are faced with expenses like lodging to food. But unlike some drivers, Myers and Holland work for a company that offers an accountable plan.
The plan allows employers to reimburse employees tax free, and come tax time, the employer can get a deduction on their own tax return. It’s a plan that will come in handy this tax season, since tax reform has eliminated the tax benefit that employees used to get for paying out-of-pocket business expenses.
According to Lynn Ebel with The Tax Institute of H&R Block, “It’s all employees that spend money for their work that is not reimbursed by their employer. For some people this is going to be a very big deal: traveling salesman, truck drivers, and maybe even ministers. They have a lot of tax deductions that total that 2-percent haircut and really have been relying on this deduction.”
That 2-percent haircut refers to the minimum threshold miscellaneous itemized income tax deductions must exceed before they can be deducted. The loss of the deduction is a growing concern as more and more find out.
But there is a chance some taxpayers will see very little impact from the elimination of the deduction due to other changes brought on by tax reform.
“It is possible that their personal exemptions and unreimbursed expenses went away, but maybe their tax rates are lower or they take the standard deduction which is higher,” said Ebel. “There is also an increase in the child tax credit for children living at home.”
So, what should taxpayers do if they are impacted?
Experts say this is the time to sit down with a tax professional and really understand how the change will impact their specific situation.
According to Ebel, “At this point of the year it is important to do a checkup to see if you can adjust your withholdings before the end of the year gets here and there are no big surprises come tax time.”
For more than 18 years, Convoy has paid per diem to provide a tax-free benefit but Myers’ concern about not knowing how changes to taxes will impact him still exist. He and other truck drivers should sit down with a tax professional and really understand how the change will impact their specific situation.
Learn what qualifies for a service animal tax deduction and how they can help taxpayers with high medical expenses.
Uncover some of the tax filing mistakes millions of taxpayers are making. With help from H&R Block, missed deductions don’t mean paying more than you need to.
Learn more about changes to the casualty loss deduction that make personal disasters, like house fires, nondeductible starting in 2018.
Should I do my own taxes? With improved online products from H&R Block, file taxes by yourself with more confidence than ever before.