03 Nov If you maintain a home office, you may be entitled to a special tax break on your commuting costs
Now, more than ever, many small business owners are working from home. While Zoom meeting after Zoom meeting can start to wear thin, removing the daily commute from one’s schedule is a huge bonus afforded to those working remotely these days. For many businesses, this is becoming the new normal with several transitioning from a central, physical location to a permanent work-from-home setup.
Did know that if you maintain a home office, you may be entitled to a special tax break on your commuting costs?
For most people, the cost of daily travel between home and a regular work location is a nondeductible commuting expense.
For the Self-Employed:
However, self-employed taxpayers who have established their home office as their principal place of business can deduct travel between home and another work location in the same business, regardless of distance and regardless of whether the other location is regular or temporary. An example would be something like driving from the home office to a second business location to pick up mail or supplies or traveling from the home office to a temporary site, like a construction site.
However, there are certain criteria that you must meet.
For instance, you must be able to substantiate the auto expenses that you claim through adequate records, such as a log or record-keeping app through your smartphone. You can either use the standard mileage rate or deduct your actual expenses. For instance, MileIQ is a commonly used mileage smartphone app, and there are more examples on our website.
If you’re an employee (not self-employed) and your employer reimburses your travel expenses, you need not report the reimbursements as income if they are made under an accountable plan. An accountable plan reimburses you for deductible business expenses and requires you to substantiate your expenses and return any amounts greater than your substantiated expenses.
Remember, business expenses reimbursed by your employer are not deductible anymore (if you are an employee). If the plan is not an accountable plan, you have to report the reimbursement as income and your deductible expenses are considered miscellaneous itemized deductions and are disallowed through the tax year 2025.
If your home office is not your principal place of business, the costs of travel between your house and the first and last business stops of the day are nondeductible commuting expenses. However, if you have a regular work location away from home, the costs of going back and forth between your home and a temporary work location are deductible. Employment at a work location is considered temporary if it is realistically expected to last for no more than a year.
If you are working out of home, reach out to us at Unbehagen Advisors where our trusted small business advisors and tax professionals can help you determine if you are entitled to this deduction to maximize your tax savings.
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