Claiming Un-Reimbursed Mileage on Your Tax Return

Employees, self-employed individuals, or other taxpayers use the optional IRS standard mileage rate (or Safe Harbor Rate) to compute the deductible costs of operating an automobile for business. If your company has not reimbursed you for your business mileage, you may want to claim the IRS standard mileage rate on your personal income taxes. This enables you to offset the work-related driving costs you incurred throughout the year. Claiming un-reimbursed mileage on your tax return can be a tricky process. Below we breakdown of the do’s and don’ts for when tax season rolls around.

What You Can Claim

You can claim the following business mileage as a tax deduction:

• Trips From One Office to Another. You can deduct any miles incurred as a result of traveling from your office or work site to a second work location.
• Temporary Work Location. A temporary work location is “a place where your work assignment is realistically expected to last (and does in fact last) one year or less.” If this temporary location is your primary workplace, you can only deduct mileage between your home and the location if it’s outside of your normal metropolitan area. (If you have another regular workplace in addition to this temporary work site, you can deduct any mileage between your home and the temporary location.)
• Customer and Client Visits. Any mileage driven from your office to meet with customers, clients or business vendors can be deducted.
• Business-Related Errands. Miles incurred while running any business-related errands (i.e., trips to the bank, post office, etc.) can be claimed.
• One-Off/Secondary Jobs. Any travel incurred while working secondary jobs to make some extra cash (such as landscaping or housesitting) can be written off. This is only true if it is not a day off from your main job.
• Job Seeking. Any miles driven to find a new job in your current occupation are eligible for a deduction as long as you’re not looking for your first job.

What You Can’t Claim

It is important to note that employees can only claim business mileage. The IRS considers any travel from your home to a permanent work location commute. The same is true of travel to a principal location where you work for more than one year. The IRS does not consider any miles incurred during your daily commute to be eligible for a deduction.

Depending on the Tax Year, you can claim “X” (whatever the IRS rate is for that year) cents per mile as part of unreimbursed employee expenses, but only expenses over two percent of your adjusted gross income can be deducted. (If you are an independent contractor, or you’re self-employed, this two percent floor will not apply.) However, you are not eligible for a deduction after you have claimed any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, you cannot apply the standard business mileage rate to more than four vehicles used simultaneously.

What You’ll Need

While deducting mileage can save tax dollars, the IRS requires you have documentation to prove your deduction is valid. If you are selected for an audit (over one million audits occur each year), the IRS will want to see your mileage logs that include dates, destinations and the reason for travel. If you also deduct your toll or parking fees, the IRS will require you to keep receipts of every transaction that show the amount, date and location of each expense.

Maximizing Your Return

Claiming business mileage can add up to a substantial deduction for many taxpayers, but the IRS has specific rules regarding when and how it can be claimed. If you are uncertain about the deductibility of miles, consult with a tax professional who can evaluate your particular situation.

For further clarification on business versus commute mileage, read more here!

Disclaimer: We prepared this material for informational purposes only. It is not intended to provide, and should not be relied upon for, tax, legal or accounting advice. Motus does not provide tax, legal, or accounting advice. For any such advice, you should consult your own advisors.