The IRS classifies all vehicle use into three categories:
- business
- commuting
- personal
In order to deduct expenses, the use must be for business. Business use generally means travel between two business destinations, one of which may include your regular place of business. Typical trips that are deductible include:
- travel from one job to another
- travel from one customer or client to another
- travel from your office or business location in order to perform business tasks, such as to pick up supplies and inventory, to check your business post office box, or to make a bank deposit
- travel from your home to a temporary worksite that is not your regular place of business, provided you have a regular place of business and your work assignment in the temporary area will be less than one year; or
- travel outside of the metropolitan area in which you work to a temporary worksite, provided you do not have a regular place of business.
Commuting expenses are never deductible
Vehicle expenses incurred in commuting between your home and your main or regular place of business are never deductible expenses. This is true even if you have an advertising display on your car, or you use the commute to listen to business books on tape or to phone your clients.
Think aheadHowever, remember you can deduct the cost of traveling between your home and a business location that is not your regular place of business.
You can take advantage of this rule by planning your day so that you make a business related-stop on the way to work and on the way home, thereby converting a portion of your otherwise nondeductible commute into deductible business travel!
Hauling equipment could make added commuting costs deductible.
On rare occasions, commuting expenses may be partially deductible if you have to transport heavy or bulky tools, materials, or equipment to and from your workplace and you incur extra expense to do so.
Work smartIt's best not to think of these as "deductible commuting costs" but as "deductible equipment transportation costs."
Thinking of the expenses as the costs of transporting equipment, tools and supplies will reinforce that only the additional cost of transporting that material is deductible.
To be deductible, you must incur additional costs as a result of transporting the equipment or other items. And, you can only deduct the portion of the cost that is higher than the costs you'd normally face in commuting by that same mode of transportation without the work implements. The fact that you would have used a less expensive mode of transportation were it not for the tools is immaterial.
ExampleRobert Jensen takes the train from his home to his workplace each workday. His daily round-trip train ticket costs $10. Every few months he must bring drafting tools and display charts to his workplace for a presentation. When he transports these tools and materials he uses his car instead of taking the train.
Driving to his workplace costs him $20 in gas, tolls, and parking fees. However, Jensen cannot deduct the extra $10 it costs him when he drives to his workplace since he would have spent that amount driving regardless of what he was carrying with him.
If, however, Jensen's tools and materials were so bulky that he had to rent a trailer to carry them, he could deduct his costs for renting and parking the trailer, as well as any increased toll charges.
Travel from home office to business location may be deductible
If you work out of your home and your home is your principal place of business, you can generally deduct the cost of traveling from home to any business destination. This is true whether the destination is another regular place of business, a temporary place of business (such as a client or project location), or a destination such as a bank, post office, supplier, etc.
