Commuting Mileage: What You Need to Know About Commute Rules
While commuting to and from work technically is a work-related activity, it doesn’t qualify for tax-free reimbursements the way business mileage does. That’s because the IRS considers travel between someone’s primary place of work and home to be a personal expense.
As an employer, you need to make sure you’re not reimbursing commutes because it could make you non-compliant with tax rules. As a driver, you should be able to distinguish commuting miles from business miles for the same reason. Getting reimbursed for a commute would mean that you’d get income that should’ve been taxed — and that would make your tax return incorrect and could land you with an audit.
This article unpacks the IRS's stance on commuting miles and explains how to keep track of mileage correctly to avoid over-reimbursing.
What is commute mileage?
A commute refers to regular trips between your home and your primary place of work, which can be an office, factory, shopping mall, or any other location in which you regularly work. Any commuting mileage driven by a self-employed person or an employee doesn’t qualify for a tax deduction or tax-free mileage reimbursement.
Interestingly, any drive that begins or ends at home, like a drive from your home to a client’s office in the morning may also be considred a commute in the eyes of the IRS.
The distinction between business mileage and commute mileage is crucial for businesses and their drivers because business mileage is deductible and can be reimbursed tax-free at standard rates, but commute mileage cannot.
Some exceptions
If a person works primarily from home — a trend that has become increasingly popular — home becomes that person’s primary workplace, so any work-related trip (like visiting the company’s headquarters) can’t be qualified as commuting. This means it can count as business mileage, and can be reimbursed.
What employers need to know about commute mileage
If your company reimburses employees for business mileage, commutes need to be excluded from your reimbursement amounts.
Business mileage, like client meetings, vendor visits, and travel to conferences, is considered a business expense. That means employees can be reimbursed tax-free for these expenses at the standard rates set by the IRS each year.
Commutes count as personal expenses and cannot be reimbursed tax-free. You can still reimburse employees for commute expenses (like paying for parking fees or transit passes) but these reimbursements need to be taxed like regular income.
What drivers need to know about commute mileage
Commutes are personal expenses and you can’t be reimbursed for them tax-free. That means if your employer accidentally reimburses your commute mileage as part of your regular business mileage, you’ll end up with under-reported income.
Your tax return may end up being incorrect, which could lead to penalties. That’s why tracking mileage and labelling trips accurately is as important for drivers as it is for managers.
How to Make Sure You’re Not Reimbursing Commutes
Every business that hires drivers needs a clear commute mileage policy. It’s the only way to both stay compliant and keep things fair for drivers and employers alike. What kind of commute mileage policy your business adopts depends on your needs. Smaller organizations may ask drivers to deduct their commute distances in their mileage logbook.
Other organizations may prefer setting a single commute distance for their entire team, especially if they have a lot of drivers who all have different commute lengths. For example, a company can set their commute distance at 5 miles. That means all drivers get 5 miles deducted from their daily work mileage. This saves time because an admin wouldn’t have to calculate a new commute distance for every driver.
What’s the best way to track commutes?
If you have a small team, calculating commutes by hand or in a spreadsheet is an option. But you run the risk of errors, and it can take time and some mental energy to figure out each employee’s commute.
Mileage tracking apps also often come with tools that help you track employee commutes. Commute Mileage, MileIQ’s commute tool, lets you set a commute distance for your whole team, and then automatically deducts it from employee’s drives labeled as “Business + Commute.” Because commutes are deducted for you every time, this method generally saves a lot of effort and is likely more accurate.
But no matter which method you decide on, automating the process, whether with an app or an Excel sheet formula can help you avoid over-reimbursing and help your employees stay compliant.
Remember: Every Mile Counts!
Knowing you need to track commute mileage solves only a part of the problem..The real challenge is remembering to track it every single time. Even the shortest trips can add up to considerable mileage. Tracking all mileage, including commute miles, with an app like MileIQ means you never have to decipher a mileage log to decide which miles count.
*Note: The materials on this website have been prepared by MileIQ for informational purposes only and are not legal advice.
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