The Ultimate Guide to Business Miles vs. Commuting Miles
Natasa Djalovic
Last update on:
September 5, 2024 10:56 AM
Published on:
As a small business owner or self-employed individual, every mile you drive for work matters. But, in the eyes of the IRS, not all miles are created equal.
This guide will help you grasp the often-confusing world of business miles vs. commuting miles.
We’ll cover everything from clear definitions and real-world examples to essential tracking methods and the potential consequences of inaccurate claims.
By the end, you’ll be able to maximize your tax deductions and keep your business on the road to success.
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The IRS defines business miles as any vehicle mileage that is driven to complete activities directly related to your trade, business, or profession.
When the IRS classifies your travel as “business mileage,” the door is opened for you to receive potential tax deductions.
These deductions compensate you for the costs associated with using your vehicle for work, which lowers your taxable income and saves you money.
Let’s visit a few common scenarios of travel that are usually classified as business mileage.
1. Client meetings
Any miles you drive to connect with clients is considered business travel. For example, the miles you travel to client consultations held at coffee shops are classified as business miles.
2. Site visits
The distance you travel to inspect a business location, deliver goods, or provide on-site services, is classified as business travel.
3. Running errands
Need to pick up inventory, purchase materials, or grab new office equipment? Any trip you make to complete these tasks counts as deductible mileage.
4. Networking events
Building relationships and staying connected through industry conferences, workshops, and local networking events contribute to the success and growth of your company. Any mileage you accrue during these trips can be classified as business mileage.
5. Travel between temporary work locations
If you work at one of your company’s multiple job sites or are assigned to short-term projects, the distance you travel between these locations is considered deductible mileage.
However, the IRS has a “one-year rule”, which states a location is only considered a temporary workplace if you realistically expect to work there for less than one year.
What are commuting miles?
According to the IRS, commuting miles are the miles you drive between your home and regular place of work. Commuting expenses are considered personal expenses and are not eligible for tax deductions or commuting mileage reimbursement.
But, if you’re a remote worker without a regular office, commuting rules apply differently.
If your residence or home office is your primary place of business, any travel you make to client sites, meetings, or other business-related locations could be considered deductible business miles.
Business miles vs. commuting miles: Two real-world scenarios
It’s crucial to distinguish between the necessary travel to get to your regular work location (commuting) and the travel needed to perform business activities once you’re “on the clock” (business miles).
Understanding this distinction will help you avoid claiming deductions that could raise red flags with the IRS.
Example #1: Business miles vs. commuting miles for the self-employed
You’re a freelance graphic designer. Your daily commute includes a quick 2-mile drive to your local co-working space. Every Wednesday, you drive out to meet a client at their office which is located 10 miles away.
On Wednesday, your odometer shows:
2 miles: Home to co-working space (commuting)
10 miles: Co-working space to a client meeting (business)
10 miles: Client meeting back to co-working space (business)
2 miles: Co-working space to home (commuting)
A total of 24 miles were driven. When viewed by the IRS the mileage breakdown is as follows:
Commuting Miles: 4 miles (the trips between your home and your regular workspace)
Business Miles: 20 miles (the round trip to meet your client)
Only the 20 business miles in this trip are eligible for tax deductions.
Example #2: The traveling sales rep
Sarah is a sales representative for a growing tech company. Her typical workday involves office time, client meetings, and occasional site visits.
She uses her personal vehicle for all her work-related travel. Below is a breakdown of her recent workday:
Morning:
15 miles: Home to the company’s main office (commuting)
30 miles: Office to Client A’s location (business)
20 miles: Client A to Client B’s location (business)
Afternoon:
10 miles: Client B to a potential new client site for a presentation (business)
25 miles: New client’s site directly to home (commuting)
Sarah’s drove a total of 100 miles throughout her work day..
If we look at the business miles vs. commuting miles through the IRS lens:
Commuting Miles: 40 miles (the initial trip from her home to the office AND the final trip from the new client’s site directly home)
Business Miles: 60 miles (all other trips made during the workday)
Even though Sarah ended her day at a client location instead of the main office, the IRS generally considers her trip back home from a work-related location as commuting mileage.
Common misconceptions associated with business vs. commuting miles
When it comes to commuting mileage, there are several misconceptions that can lead to costly errors. Below, we’ll debunk a few commonly heard mileage myths to help you avoid financial and legal consequences.
1. “I’m hauling tools, so it’s business mileage!”
Your tools may be used for work, but the IRS regards transporting them as part of your commute.
2. “My car has business ads, so every trip is deductible!”
Placing ads on your vehicle can be a smart move for your business. Sadly, displaying these ads will not magically reclassify personal trips to business travel.
3. “I have a second job, so those miles count!”
Traveling between multiple jobs might seem like business mileage. However, there are only two cases in which the IRS will allow deductions:
travel from your home to a temporary work site
travel from your primary worksite to other business-related destinations
Here’s a brief overview of two of the most common mileage tracking methods.
1. Manual method
The manual tracking method is also referred to as the “pen and paper” method. If you prefer to track mileage the old fashioned way, keep a dedicated logbook in your vehicle to record business miles.
For every business trip, write down these key details:
Trip Date. Record the date of the business trip.
Starting and ending odometer readings. Record the beginning and ending odometer readings for each trip. This figure will be used to calculate the total mileage of your trip.
Purpose of the trip. When recording the purpose of the trip, try to be as descriptive as possible. Writing “client meeting” or “supply run” provides more details than simply noting, “business trip.”
Destination. Note the address or specific location you traveled to.
Although manual tracking may seem flexible and straightforward, misplaced logbooks, omitted entries, and calculation errors are often reported by business owners who use this method
2. Mileage tracking apps
Mileage tracking apps are a powerful tracking alternative that help you streamline administrative tasks which save you valuable time and energy.
Additionally, mileage tracking apps help you eliminate human errors often found in manual records, such as omitted trips, typos, and calculation mistakes.
IRS mileage reimbursement: Simplified explanation
When you use your personal car for work, you can deduct the costs on your taxes. The IRS offers two ways to do this:
Choosing to use a mileage-tracking app can be a game-changer for your business. Besides logging mileage, these apps offer several key benefits:
Accuracy
GPS tracking technology reliably and precisely records mileage. Accurate mileage records help you maximize your tax deductions and minimize the risk of audits.
IRS Compliance
Mileage tracking apps allow you to easily classify trips and generate detailed mileage reports that meet IRS requirements.
Efficiency
Reduce the amount of time you spend recording mileage details by using a mileage tracking app that automates your tracking process.
Timeero: Your mileage tracking solution
Timeero is one of the leading mileage-tracking apps that simplifies location and mileage tracking processes. Its automatic tracking capablities, user-friendly interface, and IRS-compliant reports make it an ideal choice for businesses and self-employed individuals.
Timeero allows you to focus on what matters most – growing your business.
Potential penalties for inaccurate mileage claims
Inaccurate reporting of your business travel expenses, intentional or accidental, can lead to many negative consequences that will harm your business.
While it might seem tempting to underreport business expenses, you’re leaving hard-earned money on the table. Failing to report less than actual business mileage deprives you of legitimate tax write offs, increases your tax burden, and shrinks your profits.
On the other hand, overstating your business mileage can be dangerous. The IRS has access to extensive databases and uses sophisticated algorithms to identify inconsistencies.
Claiming extra mileage expenses can quickly raise red flags, trigger an audit, and lead to:
Back taxes and interest. You’ll be liable for unpaid taxes, plus hefty interest charges.
Fines and penalties. The IRS can impose substantial fines for submitting exaggerated mileage claims.
Loss of deductions. In severe cases, you could lose the ability to claim mileage deductions.
Criminal charges. In extreme cases of fraud, you could face criminal prosecution.
Business miles vs. commuting miles: Wrapping up
Understanding the difference between business miles and commuting miles will help you accurately track mileage and stay compliant with IRS guidelines. By adhering to mileage laws, you not only maximize your deductions but also protect your business from potential penalties.
With a reliable mileage tracking app, you can confidently navigate the complexities of tracking business mileage. To help you choose the right tracking app for your business, check out our article on the best mileage tracking apps.
Business miles vs. commuting miles:FAQ
What is considered commuting distance?
Commuting distance is the distance you travel between your home and regular workplace. These miles are considered personal and are not eligible for tax deductions.
Can self-employed individuals claim mileage from home to work?
No, self-employed individuals cannot claim mileage for commuting from home to their regular place of work. However, if you have a home office, traveling from your home to a client site or another business-related location may be considered business mileage.
Does commuting count as business use?
No, commuting does not count as business use. Commuting mileage is the travel between your home and your primary work location, and it is classified as a personal expense by the IRS.
Is commuting to work tax-deductible?
No, commuting to work is not tax-deductible. The IRS considers these trips as personal expenses. Only mileage that is directly related to business activities, such as visiting clients or running business errands, can be deducted from your taxable income.
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Natasa is a writer specializing in the IT and software industry with 6+ years of experience in content writing and online marketing. During that period, she wrote more than 1,000 articles and several ebooks. She majored in English language and literature and loves cats, sneakers, and candy. When she's not working, she's probably binge-watching Netflix.
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