Claiming Un-Reimbursed Mileage on Your Tax Return

The optional IRS standard mileage rate (or Safe Harbor Rate) is used for employees, self-employed individuals, or other taxpayers to compute the deductible costs of operating an automobile for business. If you’re not reimbursed for your business mileage, you may want to claim the IRS standard mileage rate on your personal income taxes 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, so below is a 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 are allowed to 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 as long as 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 only business mileage is eligible to be claimed. Any travel from your home to a permanent work location, or a principal location where you work (or expect to work) for more than one year, is considered commute. 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, the standard business mileage rate cannot be applied to more than four vehicles used simultaneously.

What You’ll Need

While deducting mileage can save tax dollars, you are required to 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, you will be required 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: This material has been prepared for informational purposes only, and 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.

The Author

Danielle Lackey

As General Counsel, Danielle is responsible for all Motus legal affairs and works with strategic business units to drive initiatives that bolster IRS and legal compliance for Motus clients. Prior to joining Motus, Danielle co-founded and served as CEO of Cadence Counsel, a company that helps law firms and companies thrive in an environment where work, as we know it, is rapidly changing. Before founding Cadence Counsel, Danielle practiced as a litigator at Latham & Watkins, representing major corporations and senior executives in complex civil and criminal matters. She earned her J.D. with Distinction from Stanford Law School and is a graduate of Brown University (Phi Beta Kappa, Magna Cum Laude).

Read more by Danielle Lackey

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