The IRS has some strict rules on mileage deduction when it comes to driving to work. Whether your commuting miles can be written off on your taxes is dependent on many factors and specific instances of your work-related trips.
Let’s review the rules on what the IRS considers commuting miles, what is tax deductible, and what mileage cannot be taken as a deduction, known as the IRS Commuting Rule.
The definition of the IRS Commuter Rule is “transportation between your home and your main or regular place of work.” If you've been working at the same job site for one year or more, that is considered your main or regular place of work. Those drives are considered personal, which means they are not eligible for any deductions according to IRS mileage rules.
There are circumstances when you're eligible to take a deduction on your commuter mileage. However, this mileage expense must be purely for work purposes and unrelated to personal travel. As there can be overlap at times between business and personal driving, it's essential to be able to distinguish between the two.
For instance, if you are an independent contractor who works out of your home office and you drive to meet with a client, then return directly home, this trip is business-related and therefore deductible. However, if you drive to meet a client, then stop to pick up your dry cleaning, that’s where it can get complicated.
If you’re self-employed and operate your business from somewhere other than your home, then you can't deduct the miles driven to that location – that’s considered commuting miles. However, you can deduct driving costs from your business location to work-related activities, such as dropping packages off at the post office.
These are the specific types of business drives that are eligible for a mileage deduction according to the IRS Commuter Rule.
Having a qualifying home office, which means it’s your main place of business and where you earn the majority of your income or perform most of your work tasks, allows you to bypass the IRS commuting mileage rule. For instance, you may deduct the cost of any trips you make from your home office to another business location. This is because your home office qualifies as your regular workplace.
Job site is defined as a site at which the Work shall be performed under this subcontract. If you travel between your home and a temporary job site, which you expect to work at for less than one year or if you travel between your main job site and a second job site, then you can use those trips as a tax deduction.
We’ve already covered that driving between your home to your regular job is not a deductible expense, as it’s considered personal commuting. Let’s go over additional driving scenarios where this mileage cannot be deducted.
Drives that are not deductible:
It’s important to note that many companies offer reimbursements to employees directly for mileage expenses; therefore, those employees cannot deduct business mileage from their taxes.
If your business drives are not reimbursed by your employer, then you may deduct this mileage using the IRS Standard Mileage Rate or the Actual Expenses Method. You can choose one of these options, but not both.
Also, be sure to record your business miles accurately. The IRS commuter rule clearly states it will reject your mileage log if it isn’t recorded correctly. This where a mileage tracker app such as Everlance can help. Simply swipe left or right for business or personal trips each time you get behind the wheel, and it will automatically record all your mileage driven for deductible work-related trips.
Be sure to stay on top of tracking and recording your mileage so that you’re able to successfully claim this huge money-saving tax deduction, without raising any doubts from the IRS.
Are you looking for a straightforward, IRS compliant Excel mileage log template? Our free downloadable Excel mileage log will help you track your mileage manually and contains all the information you’ll need to meet IRS standards.