This section discusses expenses you can deduct for business transportation when you are not traveling away from home as defined earlier. These
expenses include the cost of transportation by air, rail, bus, taxi, etc., and the cost of driving and maintaining your car.
Transportation expenses include the ordinary and necessary costs of all of the following.
- Getting from one workplace to another in the course of your business or profession when you are traveling within your tax home. (Tax home is
defined earlier under Travel Expenses.)
- Visiting clients or customers.
- Going to a business meeting away from your regular workplace.
- Getting from your home to a temporary workplace when you have one or more regular places of work. These temporary workplaces can be either
within the area of your tax home or outside that area.
Transportation expenses do not include expenses you have while traveling away from home overnight. Those expenses are travel
expenses, which are discussed earlier. However, if you use your car while traveling away from home overnight, use the rules in this section to figure
your car expense deduction. See Car Expenses, later.
Illustration of transportation expenses.
Figure 28-B illustrates the rules for when you can deduct transportation expenses when you have a regular or main job away from
your home. You may want to refer to it when deciding whether you can deduct your transportation expenses.
Figure 28-B. Local Transportation
Temporary work location.
If you have one or more regular places of business away from your home and you commute to a temporary work location in the same trade or business,
you can deduct the expenses of the daily round-trip transportation between your home and the temporary location.
If your employment at a work location is realistically expected to last (and does in fact last) for one year or less, the employment is temporary
unless there are facts and circumstances that would indicate otherwise.
If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the
employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year.
If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is
realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would
indicate otherwise) until your expectation changes. It will not be treated as temporary after the date you determine it will last more than 1 year.
If the temporary work location is beyond the general area of your regular place of work and you stay overnight, you are traveling away from home.
You may have deductible travel expenses as discussed earlier in this chapter.
No regular place of work.
If you have no regular place of work but ordinarily work in the metropolitan area where you live, you can deduct daily transportation costs between
home and a temporary work site outside that metropolitan area.
Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area.
You cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. These are
nondeductible commuting costs.
Two places of work.
If you work at two places in one day, whether or not for the same employer, you can deduct the expense of getting from one workplace to the other.
However, if for some personal reason you do not go directly from one location to the other, you cannot deduct more than the amount it would have cost
you to go directly from the first location to the second.
Transportation expenses you have in going between home and a part-time job on a day off from your main job are commuting expenses. You cannot
deduct them.
Armed Forces reservists.
A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. You
can deduct the expense of getting from one workplace to the other as just discussed under Two places of work.
You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. In this case, your
transportation generally is considered a nondeductible commuting cost. However, you can deduct your transportation expenses if the location of the
meeting is temporary and you have one or more regular places of work.
If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location
outside that metropolitan area, you can deduct your transportation expenses.
If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. These expenses are discussed
earlier under Travel Expenses.
Commuting expenses.
You cannot deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular
place of work. These costs are personal commuting expenses. You cannot deduct commuting expenses no matter how far your home is from your regular
place of work. You cannot deduct commuting expenses even if you work during the commuting trip.
Example.
You had a telephone installed in your car. You sometimes use that telephone to make business calls while commuting to and from work. Sometimes
business associates ride with you to and from work, and you have a business discussion in the car. These activities do not change the trip from
personal to business. You cannot deduct your commuting expenses.
Parking fees.
Fees you pay to park your car at your place of business are nondeductible commuting expenses. You can, however, deduct business-related parking
fees when visiting a customer or client.
Advertising display on car.
Putting display material that advertises your business on your car does not change the use of your car from personal use to business use. If you
use this car for commuting or other personal uses, you still cannot deduct your expenses for those uses.
Car pools.
You cannot deduct the cost of using your car in a nonprofit car pool. Do not include payments you receive from the passengers in your income. These
payments are considered reimbursements of your expenses. However, if you operate a car pool for a profit, you must include payments from passengers in
your income. You can then deduct your car expenses (using the rules in this chapter).
Hauling tools or instruments.
Hauling tools or instruments in your car while commuting to and from work does not make your car expenses deductible. However, you can deduct any
additional costs you have for hauling tools or instruments (such as for renting a trailer you tow with your car).
Union members' trips from a union hall.
If you get your work assignments at a union hall and then go to your place of work, the costs of getting from the union hall to your place of work
are nondeductible commuting expenses. Although you need the union to get your work assignments, you are employed where you work, not where the union
hall is located.
Office in the home.
If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs
between your home and another work location in the same trade or business. (See chapter 30 for information on determining if your home office
qualifies as a principal place of business.)
If your home office does not qualify as a principal place of business, follow the rules for commuting and other transportation expenses explained
earlier.
Examples of deductible transportation expenses.
The following examples show when you can deduct transportation expenses based on the location of your work and your home.
Example 1.
You regularly work in an office in the city where you live. Your employer sends you to a one-week training session at a different office in the
same city. You travel directly from your home to the training location and return each day. You can deduct the cost of your daily round-trip
transportation between your home and the training location.
Example 2.
Your principal place of business is in your home. You can deduct the cost of round-trip transportation between your qualifying home office and your
client's or customer's place of business.
Example 3.
You have no regular office, and you do not have an office in your home. In this case, the location of your first business contact is considered
your office. Transportation expenses between your home and this first contact are nondeductible commuting expenses. Transportation expenses between
your last business contact and your home are also nondeductible commuting expenses. Although you cannot deduct the costs of these first and last
trips, you can deduct the costs of going from one client or customer to another.
Car Expenses
If you use your car for business purposes, you may be able to deduct car expenses. You generally can use one of two methods to figure your
deductible expenses: actual expenses or the standard mileage rate.
If you use actual expenses to figure your deduction for a car you lease, there are rules that affect the amount of your lease payments that you can
deduct. See Leasing a car under Actual Car Expenses, later.
In this chapter, "car" includes a van, pickup, or panel truck.
You may be entitled to a tax credit for an electric vehicle (see chapter 38) or a deduction from gross income for a part of the cost of a
clean-fuel vehicle that you place in service during the year. The vehicle must meet certain requirements, and you do not have to use it in your
business to qualify for the credit or the deduction. For more information, see chapter 12 of Publication 535.
Rural mail carriers.
If you are a rural mail carrier, you may be able to treat the amount of qualified reimbursement you received as the amount of your allowable
expense. Because the qualified reimbursement is treated as paid under an accountable plan, your employer should not include the amount of
reimbursement in your income. And, since the reimbursement equals the expense, you have no deduction to report on your tax return.
A "qualified reimbursement" is the amount of reimbursement you receive that meets both of the following conditions.
- It is given as an equipment maintenance allowance (EMA) to employees of the U.S. Postal Service.
- It is at the rate contained in the 1991 collective bargaining agreement. Any later agreement cannot increase the qualified reimbursement
amount by more than the rate of inflation.
See your employer for information on your reimbursement.
If you are a rural mail carrier and received a qualified reimbursement, you cannot use the standard mileage rate.
Standard Mileage Rate
You may be able to use the standard mileage rate to figure the deductible costs of operating your car for business purposes. For 2001, the standard
mileage rate is 34 1/2 cents a mile for all business miles.
If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year.
You generally can use the standard mileage rate regardless of whether you are reimbursed and whether any reimbursement is more or less than the
amount figured using the standard mileage rate. See Reimbursements under How To Report, later.
Choosing the standard mileage rate.
If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your
business. Then in later years, you can choose to use either the standard mileage rate or actual expenses.
If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. For leases that began on or before
December 31, 1997, the standard mileage rate must be used for the entire portion of the lease period (including renewals) that is after that date.
If you choose to use the standard mileage rate, you are considered to have chosen not to use the depreciation methods under the Modified
Accelerated Cost Recovery System (MACRS). This is because the standard mileage rate includes an allowance for depreciation that is not expressed in
terms of years. If you change to the actual expenses method in a later year, but before your car is fully depreciated, you have to estimate the
remaining useful life of the car and use straight line depreciation. For more information about depreciation included in the standard mileage rate,
see the exception in Methods of depreciation under Depreciation Deduction in chapter 4 of Publication 463.
Standard mileage rate not allowed.
You cannot use the standard mileage rate if you:
- Use the car for hire (such as a taxi),
- Use two or more cars at the same time (as in fleet operations),
- Claimed a depreciation deduction for the car using ACRS or MACRS depreciation in an earlier year,
- Claimed a section 179 deduction on the car,
- Claimed actual car expenses after 1997 for a car you leased, or
- Are a rural mail carrier who received a qualified reimbursement. (See Rural mail carriers, earlier.)
Two or more cars.
If you own two or more cars that are used for business at the same time, you cannot use the standard mileage rate for the business use of any car.
However, you may be able to deduct your actual expenses for operating each of the cars in your business. See Actual Car Expenses in chapter
4 of Publication 463
for information on how to figure your deduction.
You are not using two or more cars for business at the same time if you alternate using (use at different times) the cars for business.
Example 1.
Marcia, a salesperson, owns a car and a van that she alternates using for calling on her customers. She can use the standard mileage rate for the
business mileage of the car and the van.
Example 2.
Maureen owns a car and a van that are both used in her housecleaning business. Her employees use the van and she uses the car to travel to the
various customers. Maureen cannot use the standard mileage rate for the car or the van. This is because both vehicles are used in Maureen's business
at the same time. She must use actual expenses for both vehicles.
Parking fees and tolls.
In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. (Parking fees that you pay to park your
car at your place of work are nondeductible commuting expenses.)
Actual Car Expenses
If you do not use the standard mileage rate, you may be able to deduct your actual car expenses.
If you qualify to use both methods, you may want to figure your deduction both ways to see which gives you a larger deduction.
Actual car expenses include the costs of:
| Depreciation
|
Lease payments |
Registration fees |
| Garage rent |
Licenses |
Repairs |
| Gas |
Oil |
Tires |
| Insurance |
Parking fees |
Tolls |
Business and personal use.
If you use your car for both business and personal purposes, you must divide your expenses between business and personal use. You can divide your
expense based on the miles driven for each purpose.
Example.
You are a contractor and drive your car 20,000 miles during the year: 12,000 miles for business use and 8,000 miles for personal use. You can claim
only 60% (12,000 � 20,000) of the cost of operating your car as a business expense.
Interest on car loans.
If you are an employee, you cannot deduct any interest paid on a car loan. This interest is treated as personal interest and is not deductible.
However, if you are self-employed and use your car in that business, see chapter 5 of Publication 535.
If you use a home equity loan to purchase your car, you may be able to deduct the interest. See chapter 25 for more information.
Taxes paid on your car.
If you are an employee, you can deduct personal property taxes paid on your car if you itemize deductions. Enter the amount paid on line 7 of
Schedule A (Form 1040). (See chapter 24 for more information on taxes.) If you are not an employee, see your form instructions for information on how
to deduct personal property taxes paid on your car.
You cannot deduct luxury or sales taxes, even if you use your car 100% for business. Luxury and sales taxes are part of your car's basis and are
recovered through depreciation, discussed later.
Fines and collateral.
You cannot deduct fines and collateral you pay for traffic violations.
Depreciation and section 179 deductions.
Generally, the cost of a car, plus sales tax, luxury tax, and improvements, is a capital expense. Because the benefits last longer than one year,
you generally cannot deduct a capital expense. However, you can recover this cost by claiming a section 179 deduction (the deduction allowed by
section 179 of the Internal Revenue Code) and/or a depreciation deduction. By using depreciation, you recover the cost over more than one year by
deducting part of it each year. The section 179 deduction and the depreciation deduction are discussed in more detail in chapter 4 of Publication 463.
Generally, there are limits on both of these deductions. Special rules apply if you use your car 50% or less in your work or business.
Leasing a car.
If you lease a car that you use in your business, you can use the standard mileage rate or actual expenses to figure your deductible car expense.
Deductible payments.
If you choose to use actual expenses, you can deduct the part of each lease payment that is for the use of the car in your business. You cannot
deduct any part of a lease payment that is for personal use of the car, such as commuting.
You must spread any advance payments over the entire lease period. You cannot deduct any payments you make to buy a car, even if the payments are
called lease payments.
If you lease a car for 30 days or more, you may have to reduce your lease payment deduction by an "inclusion amount." For information on
reporting lease inclusion amounts, see Leasing a Car in chapter 4 of Publication 463.
Sale, Trade-in, or
Other Disposition
If you sell, trade in, or otherwise dispose of your car, you may have a taxable gain or a deductible loss. This is true whether you used the
standard mileage rate or actual car expenses to deduct the business use of your car. Chapter 15 has information on sales of property. For details on
how to report the disposition, see Publication 544.
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