The rules regarding deductions for federal income tax purposes related to business use of a personal vehicle are often some of the most misunderstood rules in the world of taxes. Generally, the costs of commuting from a taxpayer’s home to their regular place of work are nondeductible personal expenses. What “commuting” expenses then are considered deductible?
Commuting expenses are deductible when going between a taxpayer’s home and work location if:
- The expense is for going between the taxpayer’s home and a temporary work location outside the metropolitan area where the taxpayer lives and normally works.
- The taxpayer has one or more regular work locations away from home and the expenses are for going between home and a temporary work location in the same trade or business, regardless of distance, or
- The taxpayer’s home is the taxpayer’s principal place of business, and the expenses are for going between home and another work location in the same trade or business, regardless of whether the other work location is regular or temporary and regardless of the distance.
A work location is considered temporary if employment is expected to last and actually does last for one year or less.
To determine whether the home is the taxpayer’s principal place of business, consider the following:
- The relative importance of the activities performed at each place where the taxpayer conducts business and
- The amount of time spent at each place where business is conducted.
A home office qualifies as the principal place of business if the taxpayer:
- Uses it exclusively and regularly for administrative or management activities of his trade or business.
- Has no other fixed location where substantial administrative or management activities for the trade or business are conducted.
The amount of the deductible mileage expense can be calculated using either actual expenses or the standard mileage rate. For 2013, the standard mileage rate is 56.5 cents/mile. Note that a taxpayer may convert from the standard mileage rate to the actual cost method any year. However, if the actual cost method was used in the first year the vehicle was used for business, a taxpayer cannot convert to the standard mileage rate method in a later year. Mileage logs should be maintained to document the total miles driven for the year, the total business miles driven for the year, the date the vehicle was placed in service, and the basis of the automobile (if actual cost method is used).
In summary, commuting from home to a regular or main job is never deductible. Commuting to a temporary work location or a second job from a regular or main job is always deductible. Commuting to and/or from a temporary work location and/or a second job is always deductible. Commuting from home to a temporary work location is deductible if you have a regular or main job at another location. Commuting from home to a second job is never deductible; you must have gone to the regular or main job first.
If you would like more information on how you can convert your nondeductible mileage and other expenses such as rental costs of your residence, to tax saving deductible expenses, fell free to contact me.
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