For most folks, commuting mileage is a non-deductible expense – unless you know the little tax trick I’m about to reveal.
No one enjoys fighting rush hour traffic every day, twice a day, and all you have to show for it is gas money down the drain and wear and tear on your vehicle. The good news is you can deduct virtually all your mileage, including the miles you log from your home to the office, if you meet the following two criteria:
- You are a small business owner or self-employed person, and
- You have two offices or work locations: one outside the home (Office #1) and one inside the home (Office #2).
Having two offices is very common for today’s self-employed professional. The store owner, the consultant – all these folks are typically self-employed and have two offices: one where they meet with the public (Office #1), and the other at home, where they get their paperwork done (Office #2).
Here’s how it works:
Every day you get up and “go to work.” But you don’t get in the car and drive to Office #1 right away. If you did that, even as a self-employed person, you would be racking up non-deductible commuting miles. Instead, you grab a cup of coffee in your kitchen and then head to Office #2 first, which takes all of 30 seconds.
After working in Office #2 for awhile, you hop in the car and head to Office #1, where you work for the bulk of the day.
Then, when you’re done at Office #1, you get back in the car and go “home” — except when you get inside your house, you don’t head for the living room, you go straight to Office #2, where you finish up your daily routine with a few final minutes of paperwork.
What have you just done?
You daily round-trip “commute” is now a business expense. By following this route each day, you can save hundreds, even thousands of dollars in taxes.
Here’s the proof:
Say your round-trip “commute” is 20 miles per day, or 100 miles per week. Over the course of 50 weeks, you accumulate 5,000 commuter miles. With the IRS standard mileage rate set to increase to $0.565 cents per mile in 2013, your commuter miles translate into a $2,825 tax deduction. If you are in the 33% tax bracket, then that’s $932 in actual tax savings.
While it may not cure the hassle of fighting rush hour traffic, at least you can take comfort that it’s not all money down the drain.