Transportation Expenses 

I have found this to be very confusing for a number of my clients.  There are many situations where the expense has been overlooked because the person did not understand exactly what is allowable as an expense.  When a person finds out that the expense could have been taken, often, it is too late to try and back track and figure out mileage and write it on paper for a written record.  So, let’s take some of the confusion out of this subject.

When is a transportation expense allowed?

1. You can never take transportation expenses when traveling from your home to your regular job.
2. Once you are at work, you can take the expense when traveling to another work location. Visiting customers would also fall into this category. (Transporting children in your care would also fall into this category.)
3. Traveling to a business meeting away from home is qualified.   Note, this does not include overnight expenses-that is a different expense category.  This is strictly for the vehicle expense. (Travel to and from education for the childcare also qualifies.)
4. Parking fees at your regular place of business are not deductible.  However, fees paid to park when visiting a customer or second place of business are deductible.
5. You cannot deduct the cost of travel to your regular place of work such as; taxi, bus, trolley, or a subway.
6. If you have an office in the home, you can deduct your daily transportation costs between your home and another work location in the same trade or business.  However, your home must qualify as the principal place of business. See IRS Publication 587 for more detailed information on Business Use of Your Home.
7. If you have a temporary work location 1 year or less, you can take the expense only for the portion that is outside your metropolitan area.
8. If you have a second job (whether or not this is for the same employer) you can deduct this mileage from one job to another.  Note.  You cannot take this expense if you travel from your home to the second job.

Now that you have an idea when you can claim vehicle expenses, let’s cover the methods you can use in figuring this expense.

There are two ways you can use to determine your vehicle expense for a business deduction.

1. Mileage Allowance.  With this method, keep track of the miles driven.  This must be in written form.  Specifically, keep track of:

§         Date

§         Beginning odometer reading

§         Ending odometer reading

§         Total miles driven.  (This can be determined by subtracting the beginning odometer reading from the ending odometer reading.)

§         Where you went.  (City, State, business, etc.)

§         The purpose for the trip.

 

Multiply the total miles driven for the year that are business related and multiply this amount by the government allowance for the year.  The government changes the rate allowable per mile expense usually every year; make sure to get the current rate.

 

2. Actual Expense.  With this method, keep track of all actual expenses of your vehicle.  This must be in written form.  Save all receipts.  Keep track of your business mileage!  Yes, you still need to keep track of the business mileage.  This will help determine the actual business use of the vehicle.  For any actual expense that is used on the vehicle, only the business portion can be used as an expense.  A few of the expenses that can be used are:
   • Gas
   • Maintenance such as; oil changes, cooling flush, adjustments, etc.
   • Oil added between oil changes.
   • License
   • Insurance
   • Repairs
   • Tires
   • Depreciation
   • Parking fees
   • Tolls

 

Note:

If the method chosen is the actual vehicle expense, you must stick with that decision.  You may not switch between the two methods from one year to the next. 

If the method chosen is the Mileage allowance, you may switch at a later time to the actual vehicle expense method.  However, you will loose higher depreciation levels in choosing to do this. 

No matter which method you choose, the requirements for written records are the still there.