What Are Commuting Expenses?
Commuting expenses are costs that are incurred as a result of the taxpayer's regular means of getting back and forth to his or her place of employment. Commuting expenses can include car expenses, biking expenses, and public transportation costs. These costs are not tax-deductible in the U.S.
- Commuting expense is different from business travel: commuting happens before you start working, and business travel happens while you are working.
- Getting to your job -- even if you work at home or if your job is more than 100 miles away -- is commuting.
- On the other hand, travel you do for your job once you've started working is considered business travel.
- Commuting is never tax-deductible, whereas business travel is tax-deductible.
Understanding Commuting Expenses
The first and most important thing to know about commuting expenses is that they are never deductible. Commuting is understood by the tax code to be a cost of doing business that affects both business owners and employees. Getting from your home to your work and back -- even if that trip is one hundred miles or more each way -- is commuting, not business travel. The same is true if you work from home but occasionally go to Starbucks with your laptop. Your trip to the coffee shop is considered commuting, not business travel, because you don't start work until you get there.
Business travel expenses are deductible, and those deductions follow the following rule of thumb: once you have started working at your place of work, travel you do to other workplaces is business travel and is a deductible expense.
Commuting expenses can include train, subway, bus or ferry tickets, or gas. Some businesses offer a commuting allowance or build-in costs into benefits, but frequently, commuting expenses are paid out-of-pocket by employees, managers, and business owners alike.
According to the Internal Revenue Service (IRS), a Commuter Expense Reimbursement Account, allowed by chapter 132 of the Internal Revenue Code, lets employees have their parking and commuter expenses deducted on a pre-tax basis. In 2019, employees can deduct up to $260 per month for transit expenses or up to a maximum of $260 per month for parking.
When the Tax Cuts and Jobs Act was signed into law on December 22, 2017, it impacted employers with commuting employees. Employers no longer receive a federal deduction for offering mass transit, parking benefits, commuter highway vehicle, or parking benefits to employees, unless it is required due to keeping employees safe.
Examples of Commuting Expenses
If you drive a car, ride a bike, or take public transit to your work, those expenses are not deductible on your taxes, even if you are the business owner. Travel to and from work to your residence is considered commuting and not deductible business travel.
Some employers do provide a commuting allowance to employees as a Qualified Taxable Fringe Benefit (QTFB), which means employees can pay for transit with pre-tax dollars. And some employers will pay for employees' transit as an unqualified fringe benefit up to a certain amount (usually not more than the tax-deductible $260 allowed by the IRS).
If you travel often for work, your commuting expenses end once you have reached work, and travel between then and when you leave work for home may qualify as business travel, not a commuting expense. For example, if you are a contractor and you drive ten miles to your first job site, that ten miles is counted as commuting, but not business travel. If you drive another 10 miles to a second site, and another ten to a third site, that twenty miles is considered business travel, and it is deductible. After you leave the third site for home, the miles you travel are again commute miles and not business travel.
If you work from home but decide to leave your home office for a coffee shop, the money you spend to get to the coffee shop is considered commuting and is not deductible. Once you have started work at the coffee shop, if you travel to meet a client at a different coffee shop, that travel may be considered business travel and may be eligible for a tax deduction.