Can You Write Off Parking for Work?

The deductibility of parking expenses for work depends on an individual’s employment status and the nature of the expense. Tax regulations define strict criteria for what constitutes a deductible business expense, leading to varying outcomes for employees versus self-employed individuals. Understanding these distinctions helps manage tax obligations and identify potential deductions.

General Rules for Deducting Business Expenses

To be deductible for tax purposes, an expense must be both “ordinary” and “necessary” in carrying on a trade or business. An “ordinary” expense is one that is common and accepted in the specific industry or business. A “necessary” expense is defined as helpful and appropriate for the business.

The expense must be “directly related” to the trade or business, meaning it has a clear and close connection to the income-generating activity. Personal expenses, even if incurred while working, are not deductible. These principles apply to all business expenses, including those related to parking.

Parking Expenses for Employees

The ability for employees to deduct work-related parking expenses significantly changed with the Tax Cuts and Jobs Act (TCJA) of 2017. For tax years 2018 through 2025, most unreimbursed employee business expenses are no longer deductible at the federal level. This means that for the vast majority of W-2 employees, parking costs paid out-of-pocket for work are not eligible for a federal tax deduction.

There are limited exceptions to this rule for specific categories of employees who can still deduct certain unreimbursed expenses. These include armed forces reservists, qualified performing artists, and fee-basis government officials. For instance, armed forces reservists who travel more than 100 miles from their tax home for reserve duty can deduct related expenses. Qualified performing artists must meet specific income and expense thresholds, including having job-related expenses exceeding 10% of their income from performing arts. Fee-basis government officials are those compensated entirely or partly on a fee basis, rather than a salary. While federal law largely restricts these deductions, some states may still allow deductions for unreimbursed employee expenses, so checking state tax laws is advisable.

Commuting costs—traveling between home and a regular place of work—are considered personal expenses and are never deductible for employees. This holds true even if an employee pays for parking at their regular workplace. Business-related parking, which might have been deductible prior to the TCJA if incurred away from the regular workplace, is now generally non-deductible for most employees due to the suspension of unreimbursed employee expense deductions.

Parking Expenses for Self-Employed Individuals

Self-employed individuals, such as sole proprietors, independent contractors, and partners, have more flexibility in deducting parking expenses compared to employees. Parking costs can be deducted if they are ordinary and necessary expenses incurred in carrying on a trade or business. A key distinction remains between commuting and business travel.

Regular commuting costs from a home to a primary business location are not deductible. This is because the IRS views travel between a personal residence and a main place of business as a personal expense. Parking fees incurred during business travel away from the tax home are deductible. This includes parking at a client’s office or other business-related locations during the workday.

Parking expenses are also deductible when incurred as part of local business transportation, such as driving between multiple client sites or temporary work locations. A temporary work location is generally defined by the IRS as a place where an individual realistically expects to work for one year or less. If a self-employed individual has a home office that qualifies as their principal place of business, travel from the home office to other business locations, including associated parking, may be deductible.

Parking fines or penalties are never deductible. Parking expenses are considered a vehicle expense and can be deducted whether using the standard mileage rate or actual expenses for vehicle use, with parking fees being separately deductible in both cases.

Essential Record Keeping

Maintaining accurate records is crucial for substantiating any claimed business expense, including parking. The IRS requires taxpayers to keep adequate records to prove the amount, time, place, and business purpose of an expense. For parking, this means documenting the date, amount paid, location, and business reason for the trip or parking.

Acceptable forms of documentation include receipts, parking stubs, and credit card statements. For trips where parking is part of a larger travel expense, a mileage log can help corroborate the business purpose of the trip. The IRS generally requires documentary evidence for any expense of $75 or more. Records should be kept for at least three years from the date the tax return was filed, as this aligns with the general statute of limitations for audits. Without proper substantiation, the IRS may disallow claimed deductions.