A common question with business owners, employees, and independent contractors who drive for business is whether they can deduct commuting expenses on their tax returns. If you're questioning this, too, keep reading to learn what commuting is, which expenses are not deductible, and what may be an exception to the rule.
What Is Commuting?
Commuting is considered getting back and forth from work. Commuting is a daily thing, different from business travel, which may be overnight.
You may drive to work, as many people do. The cost of driving from your home to your main work location or regular place of work is a commuting expense. Commuting also may be done by bus, trolley, subway, taxi, bike, or electric scooter. Ride-sharing services like Uber may also be commuting expenses if you take them to and from work. The costs of taking public transportation, riding a bicycle to work, or parking at your business location are also considered commuting expenses.
Commuting Expenses Are Not Deductible
Just to clarify, commuting expenses are not deductible. The time you spend traveling back and forth between your home and your business is considered commuting, and the expenses associated with commuting (standard mileage or actual expenses) are not deductible as a business expense.
You cannot deduct commuting expenses no matter how far your home is from your place of work. Consider it like this: Everyone needs to get to work, employees and business owners alike, so this expense is not part of your specific business.
If you travel for work and your employer doesn't reimburse you for your expenses, you can't get a deduction for those expenses on your tax return either. The miscellaneous deduction that included unreimbursed employee expenses is no longer available as part of Schedule A. See IRS Publication 529 (page 2) for details.
Most Business Expenses While Commuting Aren't Deductible
Even if you use your car for business purposes while you are commuting, you cannot deduct the car expenses for your business. For example:
- If you use your personal car to transport business materials, supplies, or equipment back and forth from home to office, the IRS says this doesn't make the car expenses deductible.
- If you use commuting time to talk on your cell phone about business matters, these commuting costs are still not deductible. Of course, the charge for the cell phone minutes and any additional charges may be deductible, if you are using your phone for business or if your business provides the phone.
- If you have to pay to park your car at your business location, this expense is most likely not deductible, but check with your tax professional about special circumstances.
The IRS has a helpful chart that explains commuting expenses, for businesses that are not operating out of the home.
Commuting Without a Regular Office Location
Some business people work remotely (think: sitting in Starbucks), with no fixed office location. Your home office is the location of your first business contact inside the metropolitan area. Travel to this location is considered commuting, and contact between your last business contact and your home is also considered commuting. But travel in between, as you go from one client location to another, is deductible as a business expense.
Here's an example, assuming your home isn't your principal place of business. You drive from home to meet your first client. That trip is commuting and it isn't deductible. Then you visit four more clients during the day, ending up at client number five. All of these trips are business-related and deductible. Then you head home. This last trip, the "heading home" part of commuting, is not deductible.
Exceptions: These Commuting Expenses May Be Deductible
There are always exceptions. In this case, the courts have allowed commuting expense to be deductions in these circumstances:
Home Office as Principal Place of Business
First, you must establish that your home is your principal place of business. This is pretty easy if your home is your only place of business, but if you have other places where you work, you must show that:
- You use it exclusively and regularly for administrative or management activities of your trade or business, AND
- You have no other fixed location where you conduct substantial administrative or management activities of your trade or business.
Whether or not you claim a home office deduction does not have any relationship to the designation of your home as your principal place of business.
Then, if you can establish that your home is your principal place of business, you can deduct travel expenses if you work at other locations. For example, a contractor could deduct travel expenses from his home office to a house where he is doing repairs in order to sell the property for a profit.
Traveling Between Workplaces
If you are traveling between two job sites or work locations, these trips are considered work-related travel, not commuting. For example, if you travel between your day job and a night job, you can claim these expenses as travel, not commuting. Intuit says, "If you work in two places in one day, whether or not for the same employer, you can deduct the cost of going between them."
Temporary Distant Worksite
Expenses for travel from your home and a temporary work site outside the metropolitan area where you live and normally work. The reason for this exception is that it is not reasonable for a business owner to move permanently to a worksite for a job that is only temporary.
The 2017 Tax Cuts and Jobs Act made some changes to bicycle commuting expenses for businesses and the taxability of these costs to employees. Effective for 2018 and beyond, bicycle commuting expenses that are reimbursed to employees can be deducted as a business expense. But employers must include these reimbursements in the wages of the employees who are reimbursed.