2010 CCH. All Rights Reserved.
Other Itemized Deductions
Highlights of 2010 Tax Changes
The standard mileage rate in 2010 for deducting business use of a vehicle is $.50 per mile (down from
$.55 per mile in 2009).
The depreciation component built into the standard mileage rate for business miles driven during 2010
increased to $.24 per mile (from $.21 in 2009).
Most taxpayers do not have enough miscellaneous itemized deductions subject to the 2% of AGI rule.
However, employees who are not reimbursed for their travel (such as sales people) should always keep good
records of these expenses, just in case.
Taxpayers might have their standard deduction within reasonable range of their itemized deductions. Taxpayers
can minimize their tax liability by planning their payments to take the standard deduction in one year and then
to itemize deductions in the next year or vice versa.
Solutions to Questions and Problems
The six elements include the (1) amount, (2) date, (3) place, (4) business purpose, (5) business relationship,
and (6) identity of the individuals.
When the reimbursement comes from an accountable reimbursement plan, the employee is not taxed on
the reimbursement. Martin is entitled to deduct the amount by which his deductible car expenses ($4,305
× $.50 = $2,152.50) exceed his $1,506.75 reimbursement. Martin deducts $646 as an employee business
expense. The deduction is taken as a miscellaneous itemized deduction on Schedule A (subject to the 2% AGI
When the reimbursement is made from a nonaccountable reimbursement plan, the employee is taxed on
the full amount of the reimbursement. Thus, the $1,506.75 would be included in Martin’s gross income as
additional taxable wages. Martin is allowed to deduct on Form 2106 the $2,153 that he can substantiate as
deductible car expenses. This amount is deducted as a miscellaneous itemized deduction (subject to the 2%
AGI rule) on Schedule A. ¶602.01.
An accountable plan is one that both (1) requires employees to account for (turn in) adequate substantiation
for their business expenses, and (2) return any excess reimbursements. Thus, a nonaccountable plan would
be one where the employer advances the employee amounts and does not require any excess to be returned.
A nonaccountable plan also would be one where the employer reimburses employees without checking to see
that proper documentation exists for the expense. ¶602.01.
$2,878 [(12,400 × $.50) + $398
(12,400 × $.30)]. ¶602.03.
$1,361 [($6,927 × 12,400/18,340 + $398
(12,400 × $.30)]. ¶602.03.
Because the standard mileage method produces a larger deduction, Estes should use this method to
deduct his car expenses in 2010. However, he can only use the standard mileage method if he has not used an
accelerated depreciation method to deduct car expenses in a prior year with respect to this vehicle. ¶602.03.