IRS commuting rule: Mileage rules & commute definition
If you drive your car for work, you can take a mileage deduction on your taxes. Yet, many people don’t know the IRS has some strict rules on what is deductible business driving. There’s no such thing as a “commuting to work tax deduction.” But there are circumstances where your drive from home could be tax deductible. Learn about the IRS commuting rule
IRS commuting rule: commute definition
The IRS defines your commute as “transportation between your home and your main or regular place of work.” Your “home” is the place where you reside.
Can I deduct mileage to and from work on my taxes?
Typically, no. Your commute is not tax deductible. You may get around this if you have a qualifying home office deduction. But, the IRS only lets you deduct business mileage on your taxes.
But really, is there a commuting to work deduction?
No, you can only deduct mileage for business, charity or medical reasons.
What to know about the commute to work tax deduction
Here’s what you should know:
- Your trip between your home and your regular or main job is never deductible
- A trip between your home and temporary work location is deductible if your main job is at another location
- Your commute between home and a second job is never deductible on a day off from your main job
- Your trip between your regular job and temporary job is always deductible
- You can deduct trips between your main and second job
- You can always deduct drives between temporary work locations and a second job
- Having a deductible home office makes many “commute” drives into business drives
Example: Ryan is a real estate agent in the Denver area. When he drives from his house to his office, those trips are not deductible. But he can deduct trips from his house to open houses or drives from his office to meet clients. Of course, Ryan must keep track of his miles in order to back up his deduction.
How to know if driving from home is tax deductible
The basic rule that the IRS follows is that commuting is a personal expense that is never deductible. Commuting occurs when you go from home to a permanent work location-either your:
- Office or another principal place of business, or
- Another place where you have worked or expect to work for more than one year
Example: Kim runs her business from an office in a downtown office building. Every day, she drives 20 miles from her suburban home to her office and back. None of this commuting mileage is deductible.
It is still considered commuting even if a trip from home has a specific business purpose. If you need to haul inventory or supplies from your home, some of those costs are deductible. This could include the costs of renting a trailer or other equipment.
You can’t deduct a commuting trip because you work during the trip. Making business calls or listening to work-related tapes won’t cut it. Having advertising on your vehicle won’t convert a commute into a business trip either.
The commuting to work tax deduction
The IRS commuting rule makes it tougher to figure out which drives from home are deductible. Here are some of the things you should know about drives that are tax deductible:
- Commuting is never deductible
- Working during your commute doesn’t make your trip deductible
- A qualifying home office can nullify the commuting rule
- Travel between home and a temporary work location is deductible
Commuting to work tax deduction: Made possible with a home office
One way to avoid the harsh IRS commuting rule is to have a qualifying home office. In this event, you can deduct the cost of any trips you make from your home office to another business location. The commuting rule doesn’t apply if you work at home because you never commute to work. With a qualifying home office, you’re already at your work.
Your home office will qualify as your principal place of business if it is the place where you earn most of your income or perform the administrative or management tasks for your practice. You can increase your deductions for business trips with a qualifying home office.
Example: Kim maintains a home office where she does the administrative work for her business. She also has an outside office where she does her other work. She can deduct all her business trips from her home office. This includes the 20-mile daily trip to her outside office. Thanks to her home office, she can now deduct 100 miles per week as a business trip expense. This was a nondeductible commuting expense before she established her home office.
How about a temporary work location?
The IRS commuting rule also doesn’t apply when you travel between your home and a temporary work location. A temporary work location is any place where you realistically expect to work for less than one year. It can be inside or outside of the metropolitan area where you live.
Example: Sally has an office in a downtown office building; she does not have a home office. Acme Corp. hired her to perform consulting work. This requires that she drive to Acme’s offices, 10 miles away from her home. The project is expected to last three months. Sally may deduct the cost of driving from home to Acme Corporation’s offices.
Temporary work locations are not limited to clients’ offices. Any place where you perform business-related tasks for less than one year is a temporary work location. Stopping at a temporary work location converts the entire trip into a deductible travel expense.
Example: Eleanor’s business office is in a downtown building. She has no home office. One morning, she leaves home, stops at a client’s office to drop off some work, and then goes to her office. The entire trip is deductible because she stopped at a temporary work location on her way to her office.
Once you’re sure your drives from home are deductible, be sure to track all your miles. Without an accurate mileage log, the IRS can reject your mileage deduction-even if you have the right to take a “commuting to work” tax deduction.
The Growth Center does not constitute professional tax or financial advice. You should contact your own tax or financial professional to discuss your situation.