Work Travel: Mileage Write-Offs And Tax Benefits

If you're an employee or self-employed, you may be able to write off travel mileage for work. The IRS allows you to deduct the costs of business transportation expenses, which include travelling between workplaces, visiting customers or clients, and going to business meetings outside your regular workplace. However, the IRS does not allow you to deduct your daily commute to and from your home to your regular workplace. To deduct mileage, you must be the owner of the vehicle or at least be leasing it, and you must choose to use the standard mileage rate or the actual expense method.

Employees vs. independent contractors/business owners

The Internal Revenue Service (IRS) in the United States allows both employees and independent contractors/business owners to deduct certain travel expenses from their taxable income. However, there are some important differences between the two categories.

Employees

Prior to 2017, employees could claim an unreimbursed mileage tax write-off for travel expenses related to work. However, the Tax Cuts and Jobs Act of 2017 suspended this deduction for the tax years 2018-2025. This means that employees cannot currently deduct business mileage on their tax returns.

Independent Contractors/Business Owners

Independent contractors and business owners can deduct certain business-related travel expenses from their taxable income. If they use their own vehicle for business travel, they may be able to deduct some of their commuting costs. To do so, they must keep detailed records of their mileage, as well as any other related expenses such as parking fees and tolls.

Independent contractors and business owners can also deduct certain business-related travel expenses, such as costs associated with traveling to and from client meetings, job sites, or other business-related activities. Again, it is important to maintain detailed records in order to take advantage of this deduction.

When deducting business travel expenses, independent contractors and business owners can choose between the standard mileage rate method and the actual expenses method. The standard mileage rate is a set amount per mile that covers gas, wear and tear on the vehicle, and other driving expenses. For 2023, the rate is $0.655 per mile. The actual expense method involves tracking all actual expenses related to the commute, such as gas, maintenance, and wear and tear on the vehicle. A percentage of these expenses can then be deducted based on the proportion of vehicle use for business purposes.

In addition to mileage and travel expenses, independent contractors and business owners may also be able to deduct other business expenses, such as the cost of medical equipment, uniforms, and a portion of rent and utilities if they have a home office.

Standard mileage rate

The standard mileage rate is a tax write-off for mileage set by the IRS based on miles driven. It is considered the easiest method for those who are self-employed as the rate covers everything pertaining to using a car for business. The standard mileage rate for 2023 was 65.5 cents per mile, which included the costs of gas, maintenance and repairs, depreciation, and general wear. In 2024, this rate has increased to 67 cents per mile.

The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

If you are self-employed and claiming the standard mileage deduction, you’ll need to use Schedule C to report the mileage driven for business during the tax year. You should also indicate the date you began using the car for work and answer a few additional questions.

If you are an employee, you can take a mileage tax write-off using Form 2016 to report miles and answer vehicle-related questions. The same mileage deduction rules for the self-employed apply to all other employees.

Actual expense method

If you use your car for business and personal purposes, you can deduct the cost of its business use. The IRS offers two ways of calculating this: the standard mileage rate method and the actual expense method.

The actual expense method allows you to claim deductions for car insurance, deductible repairs, and more. It is more comprehensive in what it allows you to deduct but requires you to keep track of a greater number of expenses beyond mileage. According to the IRS, business owners and self-employed individuals can deduct the following expenses using this method:

• Gas
• Maintenance and repairs
• Depreciation
• General wear and tear
• Insurance
• Registration fees
• Licenses
• Tolls and parking fees

To use the actual expense method, you must determine what it actually costs to operate the car for the portion of the overall use of the car that is for business. Multiply this figure by the percentage of the vehicle's business use. For example, if half the miles you drive are for business, you will multiply your total vehicle expenses by 50% to arrive at the business portion.

The standard mileage rate method is considered easier than the actual expense method. It does not require you to track individual purchases and save receipts. Instead, you simply keep track of your business and personal mileage for the tax year.

You can choose to use either method each year, selecting the one that gives you the largest deduction. However, if you use the actual expense method in the first year of claiming a deduction for a specific vehicle, you must continue to use this method for that vehicle in future years.

Tax home

When it comes to claiming tax deductions for work-related travel expenses, the Internal Revenue Service (IRS) uses the concept of a "tax home". This is distinct from your regular home or place of residence.

Your tax home is defined by the IRS as the "entire city or general area" of your main workplace. So, if you work in Pittsburgh, for example, then your tax home is the entire Pittsburgh metro area. This designation is important for claiming tax deductions on travel expenses incurred while working away from home.

To prove you have a tax home, you must satisfy at least two of these three requirements:

• You work and live in the area of your permanent residence some of the time.
• You have duplicated expenses when you work somewhere away from your permanent residence.
• You're meaningfully connected to your residence and the community there.

If you have no fixed workplace and no fixed home address, the IRS may consider you itinerant, meaning you cannot write off any travel expenses because you're never considered "away from home".

The tax rules for travel expenses are generally the same for employees and the self-employed. However, employees can only deduct unreimbursed work-related expenses, while the self-employed can usually deduct ordinary and necessary business-related expenses from their business income.

Temporary work location

If you have a temporary work location, you may be able to deduct the mileage between your home and that location.

A temporary work location is defined as a place where you realistically expect to work for one year or less. It can be inside or outside of the metropolitan area where you live. If the temporary location is inside your metropolitan area, you can only deduct the mileage if you have another regular workplace outside of your home. If you have no regular place of work but ordinarily work in the metropolitan area where you live, you can deduct daily transportation costs between your home and a temporary work site outside that metropolitan area.

If you have one or more regular work locations away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location, regardless of distance. If your employment at a work location is expected to last for more than one year, or if there is no expectation that the employment will last for one year or less, the employment is not considered temporary.

It's important to keep accurate records of your mileage and expenses to support any deductions claimed on your tax return. If you are selected for an audit, the IRS will want to see your mileage logs, including dates, destinations, and reasons for travel.

Frequently asked questions