For most folks, commuting mileage is a non-deductible expense --
unless you know the little tax trick I'm about to reveal.
The non-deductibility of commuter miles is painfully true for the employee who
fights rush hour traffic every day, twice a day, for 5 to 10 hours a week.
All that hassle, and what does he have to show for it? Just gas money down the
drain, not to mention the wear and tear on both his vehicle and his
stress-o-meter.
You can deduct virtually all your mileage, including the miles you log from
your home to the office or other place of business, if you meet the following
two criteria:
You are a small business owner or self-employed person, and You have two
offices or work locations: one outside the home (Office #1) and one inside the
home (Office #2). Having two offices is very common for today's self-employed
professional. The store owner, the shopkeeper, the salesman, the plumber, the
consultant -- all these folks are typically self-employed and have two offices:
one where they meet with the public (Office #1), the other at home, where they
get their paperwork done (Office #2).
Here's how it works:
Every day you get up and "go to work." But you don't get in the car and drive
to Office #1 right away. If you did that, even as a self-employed person, you
would be racking up non-deductible commuting miles, just like the employee.
Instead, you grab a cup of coffee and head to Office #2 first, which takes all
of 30 seconds.
After working in Office #2 for a while, then you hop in the car and head to
Office #1, where you work for the bulk of the day.
Then, when you're done at Office #1, you get back in the car and go "home" --
except when you get inside your house, you don't head for the living room, you
go straight to Office #2, where you finish up your daily routine with a few
final minutes of paperwork.
What have you just done?
You daily round-trip "commute" is now a business deduction, due to a simple tax
loophole that says:
Any miles driven between two business locations are deductible business
miles.
The fact that one of those two locations just happens to be your Home Office is
fine and dandy with the IRS.
By following this route each day, you can save hundreds, even thousands of
dollars in taxes.
The proof is in the pudding: Your round-trip "commute" is 20 miles per day. 20
miles X 5 days = 100 miles per week. 100 miles per week X 50 weeks = 5,000
miles per year. 5,000 business miles X 40.5 cents = $2,025 deduction.
So, you just got yourself a nice $1,800 deduction -- a deduction that you've
probably been entitled to for years but didn't know it.
$2,025 deduction X 35% income tax rate = $709 in actual tax savings. (This
example assumes a 30% federal tax rate and a 5% state tax rate. Your actual tax
rate may be different.)
Over 700 bucks... every year...
... Hmm, mmm, good! Now that's a tasty little morsel!
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