Each week, our resident small business tax expert, Stephen Fishman, answers your small business tax questions.
Question: I am an independent contractor architect. I have an office set up in my house where I check email each morning, and work on an occasional project. Virtually every workday, I drive to the office of my “client.” Can I deduct this mileage, or is it considered commuting? My client is a long term client that I have worked with for 6-7 years. Our working relationship may blur the lines between an independent contractor and an employee relationship.
-Eric in Cincinnati, OH
Stephen Fishman: You say your working relationship may “blur the lines” between being an independent contractor and employee. For tax purposes, you’re either an employee or an independent contractor. There is no in-between. If you file Schedule C with your tax return, pay self-employment taxes (that is, pay 100 percent of your Social Security and Medicare taxes with no contribution by your client), and have no income tax withheld by your client, then you are being treated as an independent contractor. If you feel you should instead be classified as an employee, you should discuss this with your client. You can also file a complaint with the IRS, your state unemployment insurance agency, and others. However, tax deductions for employee business expenses, including mileage, are harder to come by than when you’re classified as an independent contractor. Employees are much better off if their employers offer mileage reiumbursement.
Assuming you are an independent contractor, you can deduct your travel from home to your client’s office if your home office qualifies as a principal place of business for your architecture activity. Ordinarily, driving from home to a client’s office is considered personal commuting, which is never deductible. However, when you have a home office which qualifies as a principal place of business, traveling to and from your home to a client’s office is not considered commuting and is deductible. Instead, you’re driving from one office to another. This is one of the greatest benefits of having a home office (the home office deduction can also be valuable).
Your home office can qualify as a principal place of business for your architecture activity even if you do most of your work outside of your home. All that is required is that you have a place in your home that you use regularly (at least a few hours a week) and exclusively for your architecture business. It need not be the place where you earn most of your income. You can check emails, do administrative work, bookkeeping, marketing, continuing education, and other architecture-related activities from your home office.
Question: I am a home health nurse. We realize driving to the office does not count toward mileage reimbursement, but from the office to each patient and back to the office is covered for mileage. However, when the office is closed on Sundays and we make visits to patient’s homes on Sunday, can we deduct the mileage from our home to the first patient house then back home again?
-Susan in Cary, NC
Stephen Fishman: The short answer is probably yes. As you know, driving from home to your office or other regular workplaces is ordinarily not deductible because the IRS considers it to be personal commuting. But there is a big exception to this general rule: You can deduct travel between your home and a temporary work location for the same business. A temporary work location is any place where you realistically expect to work less than one year. Such a location can be inside or outside of the metropolitan area where you live. However, if the location is inside your metropolitan area, this exception applies only where you have an outside office or other regular work location away from your home.
The temporary work location exception should apply to you so long as you reasonably expect to visit a nursing client for less than a year in total, or less than 35 days during any one year over several years. Since you have an outside office, this exception applies to you whether you visit nursing clients inside or outside your metropolitan area.