Is Mileage in Excess of Normal Commute Tax-Deductible?

Tax deductions for mileage can be tricky, especially when distinguishing between personal commuting and work-related travel. The IRS has strict rules on what qualifies as business mileage, and misunderstanding them can lead to denied deductions or audits.

Distinguishing Personal Commute From Work-Related Travel

The IRS defines a personal commute as the drive between home and a regular workplace, which is never deductible, regardless of distance or route. Even if a person stops for coffee or works late, commuting remains a personal expense, similar to housing or food.

Work-related travel includes trips beyond the normal commute for business purposes, such as visiting clients or traveling between job sites. For example, if a self-employed consultant drives from home to a co-working space, that mileage is a personal commute. However, travel from the co-working space to a client’s office qualifies as business mileage.

For employees without a fixed office, the distinction is more complex. Remote workers who occasionally visit a company headquarters are still considered commuters. However, employees required to travel between locations, such as technicians servicing equipment, can deduct those miles.

Determining if Mileage Is Exceeding Normal Commute

Taxpayers must establish a baseline for their standard commute to determine if additional mileage is deductible. This varies by individual, as those with fixed work locations have predictable routes, while others may have more variability. The IRS does not set a specific threshold, so consistency in routine is key.

Extra miles must be incurred for business purposes. For example, if a worker typically drives 15 miles to an office but is temporarily assigned to a client’s location 30 miles away, only the additional 15 miles each way may be deductible.

Temporary work assignments also affect deductions. The IRS defines a temporary work location as one where an individual is expected to work for a year or less. If a taxpayer travels to a temporary site significantly farther than their regular workplace, the extra miles may be deductible. However, if the assignment extends beyond a year, the location may be considered a new primary workplace, making the commute nondeductible.

Possible Tax Effect of Excess Mileage

Claiming mileage beyond a normal commute can reduce taxable income if the miles qualify as deductible business expenses. Self-employed individuals and business owners typically deduct excess mileage using the standard mileage rate, which the IRS sets annually. As of 2024, this rate is 67 cents per mile, covering fuel, maintenance, and depreciation. Alternatively, actual expenses can be deducted, requiring detailed records of gas, insurance, and repairs, with the deductible portion based on business use.

For employees, tax treatment differs due to the Tax Cuts and Jobs Act (TCJA) of 2017, which eliminated unreimbursed employee business deductions for W-2 workers. Even if an employee drives beyond their normal commute for work, those miles cannot be deducted on a federal tax return. However, some states, such as California and New York, allow deductions for unreimbursed work expenses on state returns.

Employees reimbursed through accountable plans do not incur taxable income, provided they properly document mileage. If reimbursements exceed the standard mileage rate, the excess is taxable income. Employers using fixed and variable rate (FAVR) reimbursement plans must follow IRS limits, which require vehicles to be within a certain price range for tax-free treatment.

Documentation for Accounting Purposes

Accurate records are essential when claiming mileage deductions, as the IRS requires substantiation of business travel. A mileage log should include the date of each trip, starting and ending locations, total miles driven, and the business purpose. Digital tracking apps like MileIQ, Everlance, or TripLog can automate this process, ensuring compliance with IRS guidelines under Treasury Regulation 1.274-5T. These tools also provide timestamped records, useful in case of an audit.

Supporting documentation such as client invoices, meeting confirmations, or work orders strengthens the legitimacy of claimed expenses. For businesses reimbursing employees, maintaining contemporaneous records is necessary to meet accountable plan requirements outlined in IRS Publication 463. If records are incomplete or inconsistent, the IRS may reclassify reimbursements as taxable wages, leading to payroll tax liabilities. Employers must also retain records for at least three years, as required under IRC 6501, to protect against audits or disputes.