What Are Transportation Expenses?
Transportation expenses are specific costs incurred by an employee or self-employed taxpayer while traveling away from home for business purposes. Transportation expenses are a subset of travel expenses, which include all of the costs associated with business travel, such as taxi fare, fuel, parking fees, lodging, meals, tips, and cleaning, shipping and telephone charges that employees may incur and claim for reimbursement.
Transportation expenses are narrower in scope. They refer only to the use of or cost of maintaining a car used for business, or transport by rail, air, bus, taxi or any other means of conveyance for business purposes. These expenses may also refer to business expense deductions for businesses and self-employed individuals when filing tax returns.
Commuting expenses (traveling from home to a workplace) are not considered a deductible transportation expense.
How Transportation Expenses Work
Transportation expenses may only be claimed if they are directly related to the primary business in which an individual works. For example, claiming transportation costs when you have not actually done any traveling for the business is not allowed and can be viewed as a form of tax fraud. Transportation expenses may also include the costs associated with traveling to a temporary workplace from home under some circumstances (in such a case a claimant's travel area is not limited to their tax home).
For example, if a traveler works in the same business or trade at one or more regular work locations that are away from home (such as a construction worker), it is considered a transportation expense. Similarly, if a traveler has no set workplace but mostly works in the same metropolitan they live in, they may claim a travel expense if they travel to a work site outside of their metro area.
- Transportation expenses are a subset of travel expenses that refer specifically to the cost of business transportation by car, plane, train, etc.
- Transportation to and from work, such as commuting expenses, would not be classified as a legitimate transportation expense.
- Transportation expenses may be deducted for tax purposes subject to the appropriate restrictions and guidelines.
Transportation Expenses and Taxes
In the U.S., the IRS defines travel (transportation) expenses as such: "For tax purposes, travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job." And it defines "traveling away from home" as "your duties require you to be away from the general area of your tax home substantially longer than an ordinary day's work, and you need to sleep or rest to meet the demands of your work while away from home."
The IRS provides guidelines for transportation expenses, deductibility, depreciation, conditions, exceptions, reimbursement rates and more in Publication 463. For example, the publication sets the per-mile reimbursement rate for operating your personal car for business (53.5 cents for tax year 2017) and the first-year limit in total depreciated deduction for cars is $11,160. It also sets guidelines for users of employer-provided vehicles.