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In such a tight job market, employers are rethinking how to best balance their own expenses with the reimbursements lost by their employees since the car tax deductions law change. In some cases, company-provided vehicles look like a possible solution to help retain top employees.
It’s been nearly a year since the Tax Cuts and Jobs Act (TCJA) went into effect and it has been cause for some concern as well as excitement for fleet managers across industries. The act, which became law on January 1, 2018, eliminates the option to deduct unreimbursed employee expenses, including eligible vehicle expenses, on personal income tax returns. Additionally, the new legislation also allows unlimited 100% first-year bonus depreciation for qualifying new and used vehicles acquired and active between September 28, 2017, and December 31, 2022.
Most intriguing, favorable first-year depreciation breaks for vehicles purchased to be used for business, including 100% first-year bonus depreciation allowed for heavy, defined by the gross vehicle weight rating (GVWR), SUVs, pickups and vans used more than 50% for business.
Organizations with a mobile workforce that rent vehicles due to seasonal workload face the dilemma of continuing to rent out vehicles on a needs-basis or if purchasing their own vehicles is worth the upfront cost due to the change in vehicle depreciation reimbursements. Additional benefits for an organization include easily tracked expenses from vehicles as purely business-related instead of struggling to verify their true purpose to collect claims.
Though it’s a big decision for any business, now might be the best time to put a system in place that will accurately and automatically collect fleet data in order to create a cost-benefit analysis to determine if your bottom line would improve along with your productivity.
Here are a few questions to ask yourself as you consider how this new law impacts your current business model:
- In the last year, has your company seen significant growth?
- What is the impact on your expenses of seasons additions in staff and vehicles?
- How many of these employees require their own dedicated vehicle?
- Where do your employees see value in changes you can make to improve their quality of work?
With any major change in tax law, employers dependant on a mobile workforce should carefully consider the immediate as well as long-term effects not only on their business as a whole but also on their employees. Odds are that there could be significant impacts on the way many companies in your industry approach their business so it is worth taking the time to weigh the pros and cons before taking action versus ignoring it or assuming it doesn’t affect you, which could mean negative consequences in the long run.
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