Tax Deductions for Commuting Expenses

CommutingExpensesDid you know that your home (where you sleep at night) may not be considered your home for tax purposes? That’s right. Your tax home is generally your normal place of business. It is where you report for work each day. If you do not have a main work place due to the nature of your business, only then is your tax home where you regularly live.

This could be significant if you are one of the growing number of Americans who commute long distances for work. Commuting expenses are not tax deductible, no matter how far your regular work place is from your home. This is true even if you work during your commute.

Example 1: You take the train from your main home to your regular work location. While on the train you make calls, read reports, or respond to emails. The cost of the train is still considered a non-tax deductible commuting expense.

If you were going to a temporary work location, like a client’s office for a meeting, instead of to your own office first, that same train ride becomes deductible. It is the commute between your main home and your tax home that is expressly prohibited as an expense.

What if your commute is so long that you stay in a hotel or an apartment several days a week to be closer to your main work location? This is still considered a non-deductible expense since your work location is considered your tax home. You cannot deduct the cost of meals and lodging while at your tax home.

Example 2: You live in San Francisco, but take a job in Los Angeles. This is a permanent job, but you choose not to move your family from San Francisco to Los Angeles. You commute to the L.A. location each week and get a small apartment near the main work location. Since this is a permanent job, with a main work location in L.A., that city is now considered your tax home. As such, the commuting expense and the cost of meals and lodging are not deductible even though you are away from your actual family home.

Things change if your commute is to a temporary work location. A temporary work location is for a job or project that is expected to last for one year or less. In this case, your tax home does not change. It remains your main office. If you do not have a main office, your tax home is where you regularly live.

Example 3: Assume the same facts as in example 2 above, except that you expect the job in Los Angeles to be temporary. This position is expected to last only 8 months. Since this meets the one year or less requirement of a temporary work location, your tax home is not considered to have changed to Los Angeles. The commuting expense from San Francisco to Los Angeles, and the meals and lodging, would be tax deductible.

Speak to your tax professional for further guidance regarding the possibility of deducting your commuting expenses. Need help? Read about our tax planning and compliance services.