Taxpayers are always looking for ways to maximize their deduction. And these days, there is no better way than mileage tracking with MileIQ. Even though keeping tabs on business miles is made easy thanks to automated mileage tracking, many drivers aren’t aware of certain restrictions that apply. A common question we get asked — Is your commute to and from work tax deductible? Here’s the answer to that question and more with the IRS commuting rule in mind.
The IRS definition of commuting is “transportation between your home and your main or regular place of work.” The average American commutes over 40 miles a day, but that number increases significantly when you commute more than one hour each way. If you’re self-employed or a small business owner, knowing the restrictions of mileage deduction can help you earn big on your next tax return. One deduction you shouldn’t quite count on is your commute. Keep reading to find out why.
According to the IRS, commuting to and from work is not tax deductible. Whether you’re a real estate agent, sales professional, or independent contractor, mileage tracking at this time of day is not applicable. Plus, it happens to make sense. Why would you get a tax break before your work day even begins? The only time you may actually get around this restriction is if you qualify for a home office deduction. To meet the requirements for this type of deduction, you must have a designated office space where you operate your business from.
This question often frustrates a lot of taxpayers, especially those who have hourly commutes each day. Although yes, you are technically driving to your job, the IRS views this time as “personal miles”. The driving distance from your home to your main place of work is subjective for every employee. In similar fashion, working during your commute does not warrant a mileage deduction. Making business calls or reviewing documents for a client meeting just won’t cut it. The IRS commuting rule establishing a clear separation between commuting and deductible business hours.
We briefly mentioned there is one rather big exception to the IRS commuting rule and that is a qualifying home office. But what makes a home office IRS-approved? In order to benefit from an increased tax deduction, your home office must be the place where you earn most of your income or perform daily administrative or managerial tasks. An office space that you use on occasion will not suffice.
Let’s say you’re a real estate broker with a qualifying home office. It’s also likely you have another office where you travel to for team meetings or presentations. In this case, you can deduct the cost of any trips you take from your home to another business location. Basically, if you want to increase your deduction, a qualifying home office is the way to go!
Another instance where the IRS commuting rule does not apply is when you are working from a temporary work location. A temporary work location is any place where you expect to work for less than one year. It can be inside or outside of the metropolitan area where you live as well. Contract or consulting work generally fall under this exception. But you can read our article on what the IRS considers a temporary work location to learn more.