How to deduct business miles
Posted On: 1-28-2016 | Posted By: Jason Pax, CPA
Do you take advantage of mileage deductions to reduce your taxable income? Which miles you deduct depends largely on whether you can claim a home office deduction or not. Read on to learn how to properly deduct mileage when you use your personal vehicle for business purposes.
Standard mileage for employees
If you use your vehicle for business purposes and your employer does not reimburse you for mileage, you are allowed to take a deduction for those miles driven while on business. Examples include:
- travel from one office or worksite to a second office or worksite;
- travel to and from the airport for a business trip;
- business-related errands such as trips to the bank, office supply store, or post office;
- miles driven from your office to meet with clients for business; and
- travel from home to a temporary work location that lasts less than one year.
Commuting is not eligible for a mileage deduction. Commuting is considered travel from home to a principal place of business or another place where you have worked or expect to work for more than a year. So, your daily trip from home to work is not deductible.
In 2016, the optional standard mileage rate is 54 cents per business mile driven. Read our related article on the various 2016 mileage rates here.
Business miles when claiming home office deduction
When your residence is used as your principal place of business and you meet the qualifications for the home office deduction, miles driven from home to other work locations are effectively converted from nondeductible commuting miles to deductible business miles. There are a few items that should be considered when determining the deduction.
The first item to consider is whether or not the residence is exclusively used on a regular basis as a principal place of business. One way this requirement can be met is if the residence is used for the administrative or management activities of your business, but only if there is no other fixed location where you conduct substantial administrative or management activities of that business. Please note that employees (as opposed to self-employed individuals) wishing to meet this test have to also demonstrate that the exclusive use is for the convenience of the employer. Your WK advisor can discuss this requirement with you in more detail.
The second item of importance when determining the deductibility of transportation expenses is adherence to the strict substantiation requirements. Generally, to satisfy these requirements, a log should be kept showing personal versus business mileage and personal versus business expenses, including the amount and date of each expenditure.
If the first and second items discussed above are met, the costs of traveling between the home office and other work locations in the same trade or business, regardless of whether the work location is regular or temporary, and regardless of distance, are deductible transportation expenses, as opposed to nondeductible commuting costs. The deductibility of these transportation expenses can be valuable, as they aren’t subject to the amount limitations imposed on home office expenses.
For guidance in deducting business miles you drive this year, contact your WK advisor at (573) 442-6171 or (573) 6196.