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Definition: Commuting Expenses
Commuting expenses are the expenses which are incurred because of taxpayer's regular means of travelling from home to work-place. It includes public transportation costs as well as the car expenses. But those are never deductible, unless the commuter has multiple jobs. In that scenario, the cost of commuting from one work-place to other is allowed to deduct in the tax calculation.
The time spent going back and forth between home and the workplace is considered as commuting. Any expenses related with it either standard mileage or the actual expenses cannot be deducted as a business expense, no matter how far one’s home is from his office. Consider it like this way - everybody needs to go for the work, employees as well as the business owners, which means that this expense is not a part of one’s business. Thus it cannot be included in the business expenses. The IRS describes that the travelling expenses are one’s personal expenses. Where a person lives in relation to his business is his personal choice. Travelling is not an "ordinary and necessary" expense for the business purpose.
Example: What if one worked in Kanyakumari and commuted from Kashmir? Why those travelling expenses should be a part of your business? It makes sense when thought in this way.
Using a Car for Commuting
Even if a car is used for the business purpose while commuting, the car expenses cannot be deducted as your business. For example:
• If personal car is used for transporting materials, equipment or supplies back and forth from home to office, as per the IRS, those expenses are not deductible.
• If someone uses his commuting time talking on his mobile about his business, still, the car cost cannot be subtracted, though, one can deduct the cell phone charges or any other additional charges.
• If you are paying for the parking of the car at the business place, it is also not deductible except for a few special circumstances.
Some commuting expenses may be deductible.
There are always some exceptions. Here, the court has allowed the commuting expense to be deducted in some of the circumstances:
1. Home Office Exception - travelling expenses between one’s home and other business locations are deductible if the residence is the principal place of business.
For that, it is needed need to establish that one’s residence is his principal place of business. It is quite easy if one’s home is the only place of business for him, but if he has other places also where he works, it is needed to show that:
• He uses it solely and regularly for other activities like administrative or management of his business.
• He has no other fixed location where he conducts the substantial management activities of the business.
Whether or not one claims a home office deduction, it does not have any relationship to the designation of one’s residence as his principal place of business. Then, if it can be established that one’s home is his principal place of business, the travel expenses can be deducted if he works at other locations also.
For example - a contractor can deduct the travelling expenses from his home office to a house where he is doing his job of repairs for selling of the property to earn a profit.
2. Temporary Distant Worksite Exception – Travelling expenses from one’s home and a temporary work-place which is outside the metropolitan area where he lives and normally works. The reason behind this exception is that it is not reasonable to a business owner to permanently move to a work-place for a temporary job only.
3. Regular Work Location Exception – Expenses for travel between one’s home and temporary work locations, irrespective of the distance, are deductible if he also has more regular work locations away from home.