Commuting Costs and the Home Office

Your Guide to State, Local, Federal, Estate + International Taxation

In general, commuting costs are nondeductible. There is no deduction available for traveling between your home and your normal work location. But how does that change if your home is your normal work location?

First of all, you need to establish that your home is your principal place of business. A number of our other blog posts get into the details of those rules, but essentially, if you are claiming the home office deduction on your tax return then your commuting costs could qualify as deductible expenses.

Next, you will want to keep in mind the normal rules for deducting travel expenses: you can deduct your auto expenses for your business travel once you have reached your work location as long as you keep contemporaneous records of your travel, such as a mileage log. Tax deductions can be taken based on either the standard mileage rate or actual expenses.

Based on those rules, every mile you drive once you leave your home is deductible if you have established that your home office is your principle place of business. The same rules apply: you need to have a business purpose for your travel and you need to be traveling to another work location in the same business.

If you are an employee and your employer reimburses your travel expenses, you don’t need to report the reimbursements as income if they are made under a so-called “accountable plan.” An accountable plan is one that reimburses only deductible business expenses, requires you to substantiate your expenses, and requires you to return amounts in excess of your substantiated expenses. If the plan is not an accountable plan, the reimbursement must be reported as income, and your deductible expenses must be claimed as employee business expenses.

Normally you can’t take a deduction for your commuting costs, but if you are already claiming the home office deduction, then you may want to take a closer look to see if your costs qualify.

By Michael Anderson