Tax Tidbid
How To Turn Non-Deductible Commuting Mileage Into A Legitimate Business Expense
from Wayne Davies’s book The Ultimate Tax Reduction Toolkit
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:
1. You are a small business owner or self-employed person, and
2. 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 awhile, 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:
Let’s say 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 44.5 cents = $2,225 deduction
NOTE: 44.5 cents is the standard IRS mileage rate in effect as of January 1, 2006. In 2005, there were two mileage rates:
January 1 – August 31, 2005 40.5 cents
September 1 – December 31, 2005 48.5 cents
This Tax Tidbit is one of many provided by Wayne Davies in his book:
The Ultimate Tax Reduction Toolkit
Popularity: 1%
