Commuting and business miles often intertwine in the professional life journey but understanding the nuances and distinctions between them is crucial for determining what’s considered business purposes and personal miles.
This article aims to unravel the intricacies of business miles vs commuting miles, and which is tax deductible.
We’ll be exploring their definitions, implications, and the impact they can have on individuals and businesses.
Business miles encompass the distance traveled for work-related purposes.
Typically, this is considered travel between work locations or commuting strictly for business-related purposes. Trips to meet clients, attend business conferences, or make deliveries could all be considered a business expense when adding up the miles driven.
Are Business Miles Tax Deductible?
Unlike commuting miles, business miles may be eligible for tax deductions, making them a critical consideration for individuals who use their personal vehicles for work-related travel.
Car-related expenses associated to business miles and commuting miles can be tricky to untangle, as the same vehicle is often used for both purposes.
Calculating gas expenses is perhaps the simplest delineation between the two since adding up what miles were spent for what purposes can be a relatively easy task.
Maintenance and repairs can be a bit more complicated.
The IRS provides specific guidelines for what constitutes business miles. Any travel necessary for your job outside your regular commute is considered business miles and can be deducted.
Mileage tracking, including dates, destinations, and purposes, is important to substantiate any potential tax claims.
How Do You Keep a Record of Business Miles?
Maintaining accurate records is crucial when it comes to business miles.
Keep a log of the following information:
- The exact date.
- The destination.
- Purpose of the trip.
- The mileage traveled.
This documentation is essential for tax purposes and may be required in case of an audit.
Using Digital Tools for Accuracy
Utilizing technology such asmobile apps and GPS trackers simplifies record-keeping and helps determine the amount of business miles versus commuting miles.
Accurate documentation of business mileage enhances transparency, ensures compliance with tax regulations, and makes filing a business tax return much easier at the end of each tax year.
Can Business Miles Be Reimbursed?
Businesses may offer reimbursement for business-related travel expenses to employees.
Reimbursement policies contribute to employee satisfaction and align with tax advantages for both parties.
This can often be paid out in the form of a standard mileage rate or based on daily travel expenses, often determined by the employer ahead of time.
Business miles can also contribute to significant tax savingsfor self-employed individuals or business owners.
TIP: Use Edenred’s Claims Reimbursement to make employee reimbursement easy.
Business miles are:
- Work-Related: Business miles involve travel necessary for your job, such as client meetings, conferences, or site visits.
- Potentially Deductible: Business miles are often eligible for tax deductions. The IRS provides standard mileage rates that individuals can use to calculate their deductible expenses. Alternatively, you can deduct actual expenses related to business travel, such as gas, maintenance, and insurance.
Commuting miles refers to the distance traveled between one’s home and regular place of work or from one’s first job to their second job.
These miles are typically considered personal, as the primary purpose is transporting oneself to and from the workplace.
Commuting miles are a daily reality for many, ranging from a short local drive to an extended journey, which could include en route errands, like stopping for food, car washes, or taking the kids to school.
In terms of taxation, commuting miles are generally not deductible.
The IRS views these miles as a personal expense, irrespective of the distance covered or the mode of transportation used.
However, exceptions exist, and understanding the fine print is essential.
There are some scenarios where commuting miles might be deductibleor qualify for certain benefits.
For instance:
- If you have multiple places of work, travel between these locations might be deductible.
- If you’re self-employed, commuting to a client’s location may be considered a business trip.
Can You Claim Benefits on Commuting Miles?
Since commuting is typically a non-deductible expense, individuals cannot claim tax benefits related to mileage, gas, or other commuting costs.
Commuting miles are:
- Personal: Commuting is a personal activity necessary to get to and from your workplace.
- Non-Deductible: According to IRS regulations, commuting miles are not typically tax-deductible. The cost of commuting is considered a personal expense.
What Does the IRS Consider Commuting Miles?
The IRS considers commuting miles as the distance traveled between an individual’s home and their regular place of work.
Commuting is generally viewed as a personal expense, and the IRS does not allow individuals to deduct the costs associated with commuting for tax purposes.
Here are some key points related to commuting miles according to the IRS:
Commuting expenses, including mileage, gas, and other costs incurred while traveling between your home and your regular place of work, are typically not tax-deductible.
There are some exceptions to the general rule that commuting expenses are not deductible. One exception is if you have multiple places of work.
In such cases, travel between these different work locations may be considered deductible business travel.
For self-employed individuals, the commuting rules may differ.
In some cases, travel from a home office to a client’s locationor to another business-related location may be considered business travel and could be eligible for deductions.
With the rise of remote work, the IRS has provided guidance on the tax implications of telecommuting.
Commuting from home to a regular workplace is generally not deductible, even if the workplace is a home office.
However, travel for business purposes from a home office to another business location may be eligible for deductions.
It’s important to keep detailed records of your travel, including dates, destinations, and purposes, especially if there are circumstances that might qualify for exceptions to the general rule.
Tax laws can change, so it’s advisable to stay informed about any updates or consult with a tax professional for specific advice tailored to your situation.
If you’re tired of the back-and-forth, Edenred’s Commuter Benefits can make traveling to work a perk!
Public perception increasingly values sustainable practices in commuting and business travel.
Companies adopting eco-friendly transportation policies contribute to corporate social responsibility efforts, making them more attractive to prospective employeesand the general public.
Edenred offers commuter benefits that allow employees to use tax-free dollars on commuting costs.
This benefits program helps companies save money byreducing payroll taxes and allows employees to keep more of what they earn.
Currently, the IRS allows up to $3,600 over an entire year ($300 per month) to be set aside, pre-tax, for employees to use on transit and parking expenses. This limit is increasing to $315 per month starting January 1, 2024. That’s $15 more than in 2023.
Employee commuting needs are changing. To help companies adjust, we’ve added new shared mobility options integrated into one commuter account.
In addition to our commuter benefits program, we’ve also integrated micromobility commuting options such as:
- Bike sharing.
- Bike shops.
- E-scooters.
- E-mopeds.
- Corporate shuttles.
Edenred’s micromobility options allow easier access to transit service giving your employees the flexibility to reach their final destination faster and safer.
When it comes to employee benefits, Edenred goes more than the extra mile.
We offer several programs that improve your employee experience, including:
- Lifestyle Spending Accounts – Offer employees the flexibility to invest in health and fitness, promoting wellbeing, boosting morale, and enhancing productivity.
- Claims Reimbursement – An automated system to streamline business expense reimbursement.
- AnytimePay – Let your employees access their next paycheck with a prepaid card.
- Ticket Restaurant – Promote health, nutrition, and employee well-being with meal perks.
Learn more about our employee benefit offerings and how we can enhance your benefits package.
Schedule a meeting with us today!
