By Dr. James M. Dahle, WCI Founder
One of my favorite tax deductions is to deduct mileage used for business. If you are driving your car for business, you can deduct 58.5 cents in 2022 (up from 56 cents in 2021) for every mile you drive. That's pretty generous, considering that $4 per gallon gasoline for a car that gets 30 miles per gallon costs you 13 cents per mile. Obviously, there are other expenses associated with driving a car including maintenance, repairs, depreciation, and insurance, but give me a break: 58.5 cents is awesome.
How Much Is the Business Mileage Deduction Worth?
Imagine you own a $2,000 car. Now assume a 40% marginal tax rate. How many miles do you have to drive the car to pay for the car? Answer—9,091. Many business owners drive twice that every year. Even if you subtract 13 cents a mile for gas, it's only 11,905 miles to pay for the car. Even a $2,000 car is going to last 12,000 miles. The best part about this deduction is that they give it to you for something you have to do anyway. It's basically free money.
How Does the Business Mileage Deduction Work?
Here's how the deduction works. This is from IRS Publication 463 [2022].
The basic rule is that you can't deduct your commute, but you can deduct everything else.
Commuting vs Business Miles
If you work at two hospitals, for instance, you can't deduct driving into the first one or driving home from the second one, but you can deduct the miles between them. You have to be a business owner, too—paid on a 1099 or a K-1, not a W-2. Unreimbursed employee expenses have never been as valuable since they were subject to the 2% of income floor on Schedule A. Even that went away from 2018-2026—except for reservists, musicians, and actors with multiple employers; fee-basis state/local government officials; disabled employees (costs related to their disability); and educators (up to $250 a year).
Is There a Limit on Business Mileage Deduction?
As long as you're driving for business (and, again, your daily commute doesn't work), there is not a limit on business mileage deduction. But be sure to keep a log that includes where you're going, the date of the trip, and the odometer reading before you start and after you're done, so you have concrete evidence for how many miles you can deduct.
Can You Claim Mileage to and from Work? My Scheme Foiled
Initially, I had this great scheme. Since I have a home-based business (The White Coat Investor), I had a plan to “commute” down the stairs to the home office, then drive “between my businesses” to the hospital and back to my home office, then commute back up the stairs. Unfortunately, it turns out you can't do this. If one of your sites of business is your home office, there is an additional requirement. Both jobs have to be in the same industry—mine are not. It's too bad since it would be worth at least a few hundred dollars a year to me.
I did manage to get a few miles for each business, but it was nowhere near the mileage I drive between my home and the hospital.
Charitable Deduction Mileage Rate
There are other miles that you can deduct as well. Mileage driven for a charitable cause is deductible at 14 cents [2022] a mile. Mileage for medical care (receiving, not giving, and subject to a 10% floor on Schedule A) and moving is deductible at 18 cents [2022] a mile. It's not quite the business mileage deduction, but it's better than a kick in the teeth.
Actual Expenses
You can deduct your actual expenses for business miles instead of the standard 58.5 cents per mile. But you're going to have to be spending an awful lot on your car to beat that 58.5 cent figure. Besides, who wants to keep track of all that? It's bad enough that you have to keep a mileage log. But if you're driving a fancy Audi or Tesla or leasing just about anything, perhaps it would be worth the hassle. Depreciation, car loan interest, and lease payments certainly count toward the actual expenses. You'll just have to decide whether it's worth it to figure all that out, rather than take the standard mileage deduction.
The Mileage Log
If you get audited, you'll need to show the mileage log you're supposed to be keeping. This is supposed to be kept contemporaneously (meaning you write it down when you drive the miles, not reproduce it later). You need the date of the trip, the mileage of the trip (preferably with beginning and ending odometer readings), and the purpose of the trip.
Can My Business Pay for My Car?
Lots of people have heard that your business can lease or even buy your car and have it work out well. Unfortunately, many people are abusing this, and their practice would never hold up in an audit. You cannot have your business buy and pay for the car (essentially paying your transportation costs with pre-tax dollars) and then use it personally. It can ONLY be used for business purposes. Again, commuting is NOT a business expense. Only the business use is a business expense; the rest is taxable income to you. If you're claiming 100% business use for the car, expect an audit. Almost nobody uses their car ONLY for business use. So again, you'll have to keep a mileage log for both business and personal use and then multiply your actual expenses by the ratio of business miles to total miles.
Brand new trucks and large SUVs used more than 50% for business (defined as a vehicle with a gross vehicular weight [not curb weight] more than 6,000 lbs—a Chevy Suburban barely qualifies) are eligible for special depreciation rules. Basically, you can deduct up to $25,000 of depreciation in the year you buy it rather than only 58.5 cents a mile, although it is decreased by non-business use. In addition, all vehicles are currently eligible for 100% bonus depreciation for both new and used (if new to you) vehicles through the end of 2022. Again, this is decreased by non-business use.
How to Deduct Mileage on Taxes
When filing taxes, you'll need to use Form 2106. On line 12, you'll enter the total number of miles, business or otherwise, that you drove your vehicles that year. On line 13, you'll note the number of business miles you drove. On line 14, you'll divide line 13 by line 12 to determine the percent of business use. On line 22, you'll multiply the number of business miles (on line 13) by the mileage rate for that year to determine your business mileage deduction.
The bottom line is that business miles can be a fantastic business deduction, especially on an inexpensive car. Just remember the main rules—only business miles count as a business expense and commuting is never business mileage.
What do you think? Do you deduct business mileage? Any tips for maximizing this deduction? Comment below!
[This updated post was originally published in 2013.]
Just a few points:
1. if you pick mileage or actual costs then you have to stick with that method. You cant go back and forth from year to year.
2. The work for actual costs isnt bad. since its mostly gas, you just print a receipt at the pump. To keep them organized, just tape it to a page as you acquire them. You will end up with a page or two per month that is easy to track come the end of year.
3. For mileage log there seems to be several acceptable methods. What ive done in the past is do the actual miles for 1 month then what i do is create a spreadsheet with the miles per day based on the mapquest exact minimum distance to that location. Since i know where im going ahead of time and dont have a bunch of stops per day, that isnt so hard. It would be a lot harder if i went to a bunch of different locations per day or if my schedule was harder to predict/remember. At the end of the month, i record the total miles on the car which is very similar although slightly less than the actual as well as the total mileage. It takes me 2 minutes to create the monthly spreadsheet and fill it out.
Hey Doc, don’t forget to reduce the business basis of the vehicle by 23 cents per mile when using the standard mileage rate. More importantly, when you sell the car for more than $0, don’t forget to include as ordinary income the gain on sale of the business portion.
Hmmm…good points. I can’t imagine there are lots of gains on business vehicles, but perhaps if you depreciate it enough you could get there.
I am a resident. My primary clinical site and didactic site are in different locations 3 miles apart. Usually at the end of my clinical day I am required to drive 3 miles to the didactic site for lectures and then home. Would I be able to use these miles?
If I’m able to, I assume I would add the miles from clinical site to didactic site. Would I also be able to add miles from didactic site back home?
What business were you under the impression that you own as a resident? It sounds to me like you’re an employee with two work sites. If the employer doesn’t reimburse for mileage (and I doubt they do) you’d have to meet the threshold for unreimbursed employee expenses, no?
Remember this is the BUSINESS mileage deduction. No business, no deduction.
WCI would your “scheme” fit into my scenario. I’m an independent contracting physician at various hospitals with a home office for billing, filing, paperwork, read medical journals etc. Therefore I could “commute” to my office (same field), then to my hospitals?
I believe it would.
Depends…you would need to meet all of the requirements for the home office deduction. Is your home office your principal place of business? Is it used regularly and exclusively for business purposes?
I am in similar boat with Mike. I am contracted out to read tests from a local hospital which I do and dictate from my home office. I drive 20 miles to see patients same speciality/business. Thus I guess I can use business mileage deduction.
Also since I lease a car with 10,000 allowable mileage / year, I am highly going to go over soon. I am contemplating on just adding on mileage since lease cost is also deductible?
Thanks for your input.
As I understand it, you can either deduct either mileage or actual costs, not some combination of both.
A few comments on the excellent advice above:
1. Rex – you actually CAN switch from mileage method to actual (but see exception in note #6 below). You just can’t switch back from actual to mileage. In other words, you must elect to use the standard mileage rate in the first year. If you later switch to actual, you are required to use straight-line depreciation for the remainder of the vehicle’s useful life.
2. A VERY general rule of thumb we use in our practice is: if the car is relatively expensive and/or you may not keep it for a long time, and/or you won’t be driving it much (but will use it even less personally) it’s worth the trouble for actual, as the deduction may be larger (under current rules). Otherwise, elect to use standard mileage method.
3. Property taxes (if applicable in your state) and interest on your car loan are not included in the standard mileage rate, so don’t forget to deduct them. If you use the car for both business and personal, you will have to prorate (but you can deduct the personal portion of property tax if itemizing).
4. You must keep a mileage log for EITHER method because you still have to be able to prove the record of business versus total miles driven. We ask all clients who deduct mileage to make it an tradition to jot down their odometer readings as they are welcoming in the New Year.
5. If you are audited for ANYTHING and you deduct mileage, expect to be asked for your records. We’ve found the IRS wants proof that you have maintained contemporaneous records (not jotted down notes at the last minute – which is quite obvious) AND that you have made a reasonable effort to follow the rules. When our clients can produce such records, they typically aren’t subject to the body cavity review.
6. Mike – if you lease a vehicle, you can still use actual or mileage but you are locked in to the method that you choose for the life of the lease (iow, you can’t change from mileage to actual as you would if you owned the vehicle). So that means you can deduct mileage rather than lease payments (even for the first 10k miles), but not both.
Can you do actual cost of lease payments + gas?
Mike – yes, you can still use actual or mileage for a leased vehicle. That means if you choose “actual”, you can also deduct repairs and maintenance (oil changes, for example), insurance, and other out-of-pocket costs for the leased vehicle. But I’m not sure why you wouldn’t just choose mileage – your deduction will almost surely be higher and you have to track mileage either way.
Because I might actually move closer to work in 2 years. And since you cannot switch back and fourth between mileage and actual I thought I would be better off using actual now. Does that sound reasonable? I’ve 10,000 miles/yr maximum on lease with $600/yr payment.
$600/mo, right? I can’t get that specific without knowing more about your situation. I think it would be worth your time to sit down with your CPA and run the numbers.
You already know this from reading WC’s article, BUT since you mention moving “closer to work”, just a reminder that commuting is not deductible. Again, I don’t know your specific situation, but want to make sure other readers don’t misinterpret my advice.
Best wishes!
Since I work at multiple offices, I’ve set up a P.O. box at a post office near my house to receive business mail and journals, etc. Now I stop there once a day, and deduct all the trips between work and the post office. I also deduct trips between work and the bank once a week.
Hi. I am an independent contractor working for a courier company whose office is located 20 miles from my home. I DO NOT go to the office 99.99% of the time; I receive my daily pick-up/drop-off instructions via cell phone. I pick-up/drop-off at multiple locations daily, and I DO NOT get reimbursed for mileage. Do I have to deduct the 40 round-trip miles (which would normally be commuting miles IF I worked out of the office)?
Hi, Steve, From the fact pattern posted, it appears to me that you ‘could’ set up a legitimate home office. Since you’re an independent contractor, you don’t technically “commute” to work but use your home as your place of work. Of course, you would need to have a segregated office used solely for work to deduct, but that’s another post.
Hi, I am a resident in the process of finalizing a contract for post residency work. The contract establishes me as the owner of a Service Corporation and I provide contracted work to my group. My group has the contracts with the hospitals and surgical centers where the actual medical work is done. In reviewing this blog and the tax code reference above, I have concluded that I can drive from my home office (billing, paper work, medical journal review) to places where medical service is provided and deduct the mileage. Would you agree?
Hi, Paul, If you are working through your own corporation, it is a little more complicated, but still doable.
*First, could you explain what you mean by “Service Corporation”? If, by this, you mean PSC, I would first recommend that you reconsider your choice. PSC’s are no longer the standard or best choice for professionals, but I still run across physicians who use them.
*Second, are you the employee of the corporation you own? If your home office is your “base” of operations and you are not provided a separate office that you could use at A hospital (rather than multiple locations), then yes, it appears to me that your mileage could be deducted.
*Third, an S-corporation or SMLLC using a home office has limitations imposed by IRS code section 280A. for example, you’ll need to have a rental agreement in place and a “accountable plan” to reimburse you as an employee/member. Just wanted you to be aware.
Of course, always discuss the specific facts of your case with your personal advisor, as he/she is aware of any other issues that might affect this advice.
I’d be interested in hearing your opinion about why a PSC is no longer a good choice for docs. If brief, perhaps just as comment here. If lengthy, perhaps as a guest post.
Sure. I’ll send my thoughts to you and you can decide. Prob better as a guest post. Will shoot for end of week.
Take your time. As you know, I’m months out on posts. Fewer on guest posts than my stuff, but still no rush.
Just asking for a bit of clarification on the s-corp question:
If a person owns an S-corp, has a home office, and works at a hospital where he/she does not have an office, can he/she deduct mileage expenses for the drive to/from the hospital? Say the doc spends about 25% of the time working from home and 75% in the hospital.
Sounds like the answer is “no”, but just want to confirm.
Thanks
I am a hospital owned physician. I do not claim miles for going to work in the morning, or going home at night. I do claim miles during the day if I have off site surgery. My question is this…assume I am on call. I am at home after returning there earlier in the evening. The ER calls and I have to go back in to operate. This is the second trip in that day. Can I claim these miles?
I too would like to know the answer to this question. I am a CT tech, who is on call every 3rd weekend after working my routine 8 hour shift. There have been weekends after i have already worked my shifts that i traveled back and forth several times, one weekend i put 300 additional miles on my car. Are these trips back to work for the 2nd, 3rd, 4th and so on times tax deductable?
I don’t see anything that says they are. Just because you go to work 4 times a day doesn’t mean it isn’t a commute each time you go. If you can somehow claim your principal place of business is your home, however, then driving from home to the hospital is no longer commuting mileage, but business mileage. But be prepared for an audit.
I work a full time job for a company but work remote from my home. My closest office is based 70 miles away. I do travel there usually once a week but I do not have a personal office there, I am designated at a remote employee and do not get mileage reimbursement for this travel. I do travel to training sites throughout the year but am allowed mileage reimbursed by my company. Would I be eligible to claim (and would it be beneficial) the mileage I travel to the office 70 miles away on a weekly basis.
Sounds like you’re an employee. The best mileage deduction (Schedule C) is for business owners, not employees. There is also an employee mileage deduction (Schedule A, subject to a significant floor that makes it unlikely you can claim it) but it isn’t as good. You can learn more here:
http://www.irs.gov/taxtopics/tc514.html
Just because it is “deductible” doesn’t mean YOUR taxes will be reduced by deducting it. I’d try to get the employer to reimburse you for that once a week travel.
If I lease advertising space on my car where I am paid a flat rate to drive my car around doing my normal daily activities, can I deduct my mileage from my taxes. So say I’m paid $300 a month and drive 1000 miles a month. Over the course of a year I’m paid $3600 to advertise on my car and drive 12000 miles. Could I deduct roughly $6000 off my taxable income (advertising lease and regular job) when I do my taxes?
I’m pretty sure that one has been looked at and isn’t legitimate. Let me see if I can find a source.
Ahhh..here it is: http://www.ustaxcourt.gov/InOpHistoric/WILLOCKC.TCM.WPD.pdf
A dentist who tried to deduct 100% of his driving expenses because his license plate holder had the name of his practice on it. No dice in tax court. Here’s a nice article about it: http://www.tomcopelandblog.com/2011/05/whats-deductible-when-you-place-an-advertising-sign-on-your-car.html
I am self employed I have a home office where spend only 10÷ of my time. I work in clients homes can I deduct round trip from home office to client and back home? Some days I have one client some days two. I go back to my home office in between. Is the second client round trip also deducitable? I also work for someone as self employed and I go to her office a couple times a month is that trip deducitable?
Yes. That sounds like it is all business mileage, but unless it is for your self-employed job, it isn’t deductible to you. The basic concept is office to office is deductible, home to office and office to home is not. But you have to be self-employed at one of the offices you’re going to or from.
Yes, I would count all of the mileage as tax deductible, assuming your home office is your main office and that you don’t have additional work space provided by an employer. Of course, I am assuming you have met other requirements such as regular and exclusive use.
We have a small business and employ a marketer. She generally claims mileage from the main office to her calls. She also catches up on paper work and makes phone calls from her home. (secondary office) When she runs an errand while working from home, she will claim the mileage from the main office to the store by her house.(30 miles) There is the same store by the main office. She will also stop off at home during the day and claim mileage to her home and then again when she leaves. If she is working from home and runs to the store, shouldn’t she just be able to claim the miles from her home?
She’s an employee? So she is claiming these as unreimbursed employee expenses?
There are several moving parts to your question. If by “employee”, you mean you pay her via 1099 and don’t withhold taxes (technically a subcontractor), then she would be able to claim mileage from her office (home) to any business activities. If she has a business reason for traveling to a store that is further from a nearer location, she can deduct those miles.
If you truly employ her (pay her via W2), then the best option for you would be to set up a mileage reimbursement system (an “accountable” plan in IRS lingo) and define parameters for what you will and will not reimburse.
If she is employed by a “main” office and this is a secondary business she runs from her home, she will qualify to deduct mileage for her primary job only as employee business expenses and you need concern yourself only with any mileage she asks you to reimburse.
Good luck and hope this helps.
I just started driving Uber as a second job. My primary place of employment is 65 miles from my home. If I were to go out before my primary job and try to catch a fare, and then go directly to work, would I be able to expense those miles between my 2 jobs? If so, would I have to have a fare in order to prove I was working? Would the opposite work as well – expensing the mileage from my primary job to drive for Uber in my home town?
Seems pretty gray to me. I might try it. I doubt it has been tested in the courts yet.
You can deduct the cost of driving from your main job to your secondary job (even if self-employed) but you cannot deduct the round trip between home and your main job. So you will not be able to deduct the 130-mile round trip each day. You can deduct all Uber mileage beyond the round trip. See IRS Pub 463.
In your situation, I doubt whether you even need a home office because you likely do most of your work from your pocket (smart phone), which would mean that you could not deduct the mileage from home to your first fare. But I’ll leave that discussion up to your CPA.
Thanks. If I go out in the morning and try to get a fare and then log the mileage from wherever I end up to my main job would that count? That would be going from secondary job to primary job – not from home to my main job.
Chris,
Wondering if you ended up doing this? I think this is totally legit, we all appreciate Johanna’s comments, but after consulting multiple different CPAs i believe she is far to the right of conservative.
The way I read it, if you go to your regular job in the same day that you go to your 2nd “job”, then you are not allowed to deduct the round-trip mileage to your regular job. However, this is an unusual situation (driving all over the place), and it’s probably best to take it up with a professional more familiar with your case. Without researching more at this point, if you were my client, that’s the way I would handle it unless I could find a PLR or case to back up a more generous interpretation. (And that wouldn’t necessarily be definitive, but I would at least be able to back up my position.) Not possible to move closer to your main job, I guess? Quite the commute…
Please help me understand. I am a W2 employee in my first job (soon to be partner and self employed but let’s ignore that part). I’m an ENT. I am also a 1099 contractor at 7 or 8 hospitals taking ENT call. I do not take call every day but I make about 100K/yr overall taking call. It’s significantly less than my main clinic/surgery job.
We have a home office that can be my 1099 office – reading films, journals, billing, etc. same field, right? So can every trip I take from home, whether it be to the W2 office or to a hospital/surgery center count as mileage? Do I have to be on call that day? Seems like I can use the office deduction but it’s not clear in what situations.
Remember there are two deductions here- the home office and the mileage. Whether or not you can take the home office depends on if you use it regularly and exclusively. But it sounds to me like all those miles count.
My CPA says I cannot deduct any mileage to and from my W2 job unless I am on call. I can “commute” to my home office anytime, and go on from there. If I’m on call that day, it’s all business no matter where I go, right? But what if I am not on call that day and not doing the 1099 job? Can I commute to my home office and count the miles everywhere that day? I’m at a loss on that….Help??
Read the rules and decide if you think you’ve got a decent argument you feel comfortable defending in an audit or in tax court. If the work you do at your home office is check your email over your morning Joe before going to the hospital where you do your real work all day before driving back to your home office and then commuting upstairs, it might be a little tougher.
I will be working out of an office 60 miles away, as an independent contractor. This work will require me to be in the contracting company’s office for a full 40 hour work week. This work may or may not continue for a full year. I also do some freelancing out of my home where I maintain a tiny office. Tasks at my home office is limited to billing, research, and other administrative tasks. The large majority of my money is made at the office I travel to. CAN I DEDUCT MY MILEAGE TO THAT OFFICE?
Sounds like it to me. I’d certainly try it as I feel I could defend that well in an audit/tax court if I had to. Doesn’t mean I’d win, of course.
I am sorry to disagree with WCI, which is very unusual. Per IRS Pub 463, your tax home can be different from your residence. Your tax home is determined by 3 factors, one of which is that you have living expenses at your main home that you must duplicate because your business requires you to be away from that home. If, as I presume, you are driving the 60-mile round trip daily and not renting a place to stay during the week, then your tax home is at the contracting company location.
If, OTOH, you rent an apartment, you may be able to claim the once-weekly 120 mile round-trip, along with the rental costs, a food per-diem, etc., but I believe it might still be iffy because the IRS would likely rule that the distance is not far enough to warrant living there.
I consider myself aggressive with tax reg’s but would not recommend deducting the mileage in this situation. The travel expense will be so great that your return will stand out from the norm in IRS records.
I hope this helps.
I guess I better qualify my answer. If you commute downstairs to your home office, actually do some work there on your side business, then drive to your other job 60 miles away where you do 40 hours of work a week, I would say that trip is deductible. If you then drive back to your home office, actually do some work there, and then commute back up the stairs, I’d say that trip is also deductible.
I don’t think the tax home concept comes in to play here. That’s more about when you work away from home, not your daily driving between your jobs. In this situation, I don’t think he’s traveling to a tax home that is separate from his family home. It’s just his daily drive. The tax home concept comes into play when you’re lodging somewhere besides your family home.
As Pub 463 states, your tax home is your regular place of business or post of duty, regardless of where you maintain your family home. It includes the entire city or general area where your business or work is located. I’d say 60 miles is all one big tax home in my book. Now, if he were driving 300 miles, staying in an apartment there all week, then returning home on the weekend, I agree with your assessment that he has a different tax home. In this case, he’s just driving between two jobs, the one he does at home and the one he does in a hospital 60 miles away.
But again, it doesn’t matter what Johanna or I think on this subject. If you don’t get audited, you get the deduction. If you do get audited, it comes down to the auditor +/- the judge in tax court as to whether or not you get the deduction. Personally, I think I’d take this one and if necessary, defend it in an audit/tax court. If I lost, I’d pony up the taxes.
I do agree with Johanna that the larger this deduction gets the more likely you are to see it in an audit. 120 miles a day, 5 days a week, 48 weeks a year x 58 cents a mile equals $16,704. Doesn’t mean you shouldn’t take it if you deserve it, but I would expect an audit after claiming a mileage deduction that large.
Absolutely the tax home concept comes into play here. According to Pub 463, if you have more than one place of work, consider the following when determining which one is your main place of business or work.
* The total time you ordinarily spend in each place.
* The level of your business activity in each place.
* Whether your income from each place is significant or insignificant.
I’ll leave it to LMK and his/her CPA to determine that, but from my reading of your post, your tax home is your “job” that is 60 miles from your residence.
Audit lottery (“If you don’t get audited, you get the deduction”) is not a game I would encourage anyone to play. With utter respect for your position and knowledge, we’ll simply have to agree to disagree.
The concept of tax home is discussed in chapter one, under travel related expenses, not chapter four, where the concept of business mileage is discussed. IMHO, it doesn’t apply there. If it did, it would be mentioned there. In my view, we’re talking about two separate types of deductions. I think the most relevant paragraph to this situation in Pub 463 is this one from figure B at the start of Chapter 4.
Second job:
If you regularly work at two or more places in one day, whether or not
for the same employer, you can deduct your transportation expenses of getting from
one workplace to another. If you do not go directly from your first job to your second
job, you can only deduct the transportation expenses of going directly from your first
job to your second job. You cannot deduct your transportation expenses between
your home and a second job on a day off from your main job.
An “audit lottery” is completely appropriate in a gray area, and hardly a game. What you are saying is that you would encourage someone to pay more taxes than he owes, and I disagree with that. However, I agree with you that if he has a CPA, he should go talk to one, and if he doesn’t, he should go talk to one about this issue so he understands it as fully and possible and understands the risks if he decides to deduct this. He is looking for clarity that I do not think exists in the tax code. He should read the entire Chapter 4 of Pub 463 and discuss it with his CPA.
The distance between your home and your place of work is your commute. Your home office will qualify as your principal place of business if it is the place where you earn most of your income or perform the administrative or management tasks for your business. In this case, I see no evidence that LMK’s principle place of business is the home office but, rather, a small side business where he/she freelances. The principle place of business is where he/she drives (presumably) 60 miles per day. That said, there are perhaps steps that LMK could take to rectify the situation and do more of the administrative work from his/her home office. Of course, I’m not privy to the agreement with the contracting company and whether billing functions, for example, could be carried on from home.
Business mileage is still a travel-related expense, regardless of how the Pub separates the two.
The concept of an audit lottery, in my experience, is used by CPAs to refer to taxpayers (and preparers) who are willing to chance risky tax behavior (not necessarily “gray” areas) and take deductions that have little chance of being upheld on audit because the odds are so slim that these practices will be discovered by the IRS. As I said, I am quite aggressive, but only where I believe I have a reasonable chance of winning on audit. In this particular case, I would not feel comfortable and would not want to risk the excellent reputation I have with the IRS (and they DO keep track).
If I submitted a return for a client that I do not believe has a chance of winning on audit, I could not only lose my license but also be prosecuted by the IRS, depending upon materiality, facts and circumstances. No client is worth that.
Of course, I would NEVER encourage somebody to pay more taxes than he/she “owes”, that’s just illogical. People hire me to pay the least amount of taxes possible within the confines of the tax code over a lifetime or the life of a business. In some situations, that may mean paying more taxes in one year in order to save a considerable amount more in a later year or to pay additional taxes now for a bigger reward at retirement (Roth contributions, for example).
All right, you’re making me go back and read Pub 463 more carefully. Now that I reread it, I think this is probably the most relevant quote:
Clearly he is going from his home to a regular place of business, so he would have to meet one of the exceptions. The listed exceptions are:
1) A temporary work site outside his metropolitan area. At 60 miles, he probably doesn’t qualify under this exception, not to mention he may be there more than a year, making it not temporary.
2) You have one or more work locations away from your residence. Sounds like he meets this one.
3) Your residence is your principal place of business. He doesn’t meet this one.
Change the “OR” to an “AND” and I agree he doesn’t meet criteria. But the way it stands, it reads to me as though he does. I wish his example were included in the three examples given, but it isn’t. I wish the IRS would clarify this, as it is a very common situation among my readers (and me.) But I have yet to see anywhere they have done so.
Your best counterargument is this paragraph:
In this case, you must have both a qualifying home office, it must be the principal place of business, and both jobs have to be in the same business. I only meet one of those three criteria, so I don’t claim my mileage between my two jobs. But if you apply this paragraph to our questioner, he wouldn’t qualify purely based on the principal place of business rule. How you reconcile that with the quotation I cited above is beyond me. Makes me wonder if the IRS meant for that OR to read AND in which case this would be crystal clear. As it stands, I see it as a gray area.
This has been an excellent and thought-provoking discussion. I agree that the meaning is “and” and not “or”. And it is worthwhile to note that an IRS pub is not considered authoritative in the event of an audit so we are spinning our wheels a bit arguing over what the meaning of “is” is while referring to an IRS Pub. In an audit, you would rely on regs and case history. You cannot even use PLRs (Private Letter Rulings) unless you have gotten your own, of course, although they do carry more weight and can sway the argument far more than can a publication. While I remain firm on my original advice, I appreciate your argument.
I can’t imagine there isn’t a case out there on this topic. I’m not very good at finding them though.
I work primarily from home; so, technically my business mileage should be deductible. My employer pays us hourly to drive, but does not reimburse for mileage. I am confused as to whether or not I can deduct mileage since I am driving “on the clock”. Can you clarify how this works?