How Does IRS View the Mileage to and from Work?

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The IRS considers the first trip out of your house to the office and the last trip from your office to your home as commuting.

Commuting is not an allowed deduction, and therefore you cannot claim mileage deductions on commuting.

The IRS sees where you live as a personal choice, and thus if you live far from your place of work, the expense you incur will be on you.

Making business calls, replying to emails or having business conferences on your way to work will NOT convert a commute into a business mile.

Pro Tip:

You can get around this IRS rule by creating a home office and ensuring it meets federal standards that allow it to be treated as your principal place of business.

To prove your case about your home office being your primary location of work, you must at least:

  • Show you regularly or exclusively use your home office to meet clients or customers
  • Have a separate room or specific area in your home that’s exclusively for business
  • Show you conduct the majority of your business tasks at your home office

The evidence you provide will allow you to log business mileage from your home office to your place of work, and this is an allowable deduction.

How to Get Mileage Deductions on Taxes in 2024

1 – Standard Mileage Rate

If you choose to use the Standard Mileage Rate method of deduction, you will use the following rates for deduction:

  • Business mileage at 67 cents per mile
  • Medical miles at 21 cents per mile
  • Charity miles at 14 cents per mile

Example:

James is a salesman for a pharmaceutical company. During the year, he drove a total of 18,000 miles to meet clients and 4,000 miles from his home to the office and back.

He incurred a total of $650 for parking and $700 for tolls.

During the same year, he visited the hospital three times and covered a total of 200 miles. At the end of the year, he drove 100 miles for a charity ball organised by the Help the Children Fund.

Calculate his total mileage deduction for the year.

ParticularsAmount ($)
Business drives x 67 cents (SMR Rate) i.e.
18,000 miles x 67 cents = $12,060
12,060
Parking costs650
Toll expenses700
Miles driven for medical purposes x 21 cents i.e.
200 miles x 21 cents = $32
42
Miles driven on behalf of charity organizations x 14 i.e.
100 miles x14 cents = $14
14
Total Deductible Mileage13,466

Note 1: Toll and parking expenses are NOT allowed if you have already claimed depreciation on the vehicle.

Note 2: You will note that the 4,000 miles driven from home to office and back are NOT included here because they are regarded as commute mileage by the IRS.

The only way to convert the miles into allowable deductions is for James to convert his home into an office from where he will need to do most of his administrative work.

deductible transportation expenses
Source: www.nerdwallet.com

2 – Actual Expenses

Going the actual expenses route requires you to determine what it actually costs you to operate your vehicle for the duration it’s in business use.

You’ll need to keep accurate records for the following qualified expenses:

  • Gas and oil
  • Insurance
  • Licenses
  • Repairs
  • Tires

Other expenses you can track include registration fees, lease payments, interest on your auto loan, and depreciation.

Remember, you can opt for the standard mileage rate in the year you place your car in service, then switch to the actual expense method later.

But if you do so before your vehicle is fully depreciated, you’re required to use the straight-line depreciation over what’s estimated as your vehicle’s remaining useful life. Naturally, there are limits on the depreciation you can deduct.

Remember to ensure that all reported expenses can be attributed to the business miles portion of the total miles driven. Inaccurate reporting or attempting to double-deduct the same expenses (like deducting both mileage, gas and maintenance expenses) can trigger an IRS tax audit.

Separately Deductible Car Expenses

There are other vehicle expenses that can be attributed to business use, such as parking fees and tolls, which are separately deductible. You’re permitted to fully deduct these (business-related) expenses whether you use the standard mileage rate or actual expenses.

While you can deduct parking fees and tolls, any fines or penalties incurred from parking tickets are not deductible. Instead, these are considered personal expenses that you’re liable for.

Additionally, you can’t deduct the parking fees you pay to park your vehicle at your place of work. In this case, the IRS considers such fees to be part of your commuting expenses.

Remember, you can avoid unnecessary IRS audits when you don’t claim expenses that aren’t necessary to conduct business.

Standard Mileage Rate vs Actual Expense Method

Now, you might wonder which of the two methods is best for your deductions.

If you drive a lot for work, the standard mileage rate typically gives the highest deduction. However, the actual expenses method can be better if:

  • You don’t use your car much
  • Your car’s really gas-efficient
  • Your car has had a lot of repair work done

To be absolutely sure, track both your actual expenses and your mileage, then determine which expense method works best for you at the end of the year.

Unsure whether an expense is a valid deduction? Make things simple by speaking with your accountant or tax advisor. They’ll help you navigate through the complex tax code and determine what expenses you can claim.

What Is the Advantage of Standard Mileage Rate over Actual Expense?

The Standard Mileage Rate requires few records because you are only required to keep the records of miles driven for business purposes.

Contrastingly, the Actual Expenses method requires that you record ALL the expenses incurred for running a car. You will also be expected to keep the receipts showing that you paid for the said expenses.

As the best practice, if you opt to go with the Actual Expenses method, you need to keep a very detailed account of your daily car expenses.

After filing your returns, check the costs that weren’t allowed by the IRS. That’ll help you avoid doing unnecessary work during the next round of filing the returns.

Remember that, since the standard mileage rate includes the cost of gas and maintenance, you should either use it or the actual expenses method—not both.

Bonus Tip: You can use the standard mileage rate if you own or lease your vehicle. However, you must use the actual expense approach if you’re renting the vehicle.

Limitations of Using Standard Mileage Rate

The Standard Mileage Rate is limiting in nature. There are some situations where you cannot use the method to deduct your mileage in which case you are stuck with the complicated Actual Expenses method.

Within the first year of using the car for business purposes, you must start using the Standard Mileage Rate.

The IRS stops you from using the method in subsequent years if you didn’t choose the method in the first year.

If you opt for this method, you can never factor in the operational costs in mileage deductions even if the costs give you a higher deduction compared to the standard mileage rate.

The IRS argues that it has already factored in all these costs when coming up with the rate.

What Is Mileage Reimbursement?

Don’t confuse mileage reimbursement with mileage deduction.

Mileage reimbursement occurs when you are reimbursed by the employer or client for the miles driven for business purposes.

Most employers reimburse mileage as a way of attracting and retaining top talent.

Mileage deduction is the amount of money you claim against your tax when filing returns.

What Are the Limits to Claiming Mileage Deductions?

There is no limit to the number of miles you can claim as long as you have sufficient evidence that they happened.

However, the IRS will pay particular interest to your claims if:

  • Your mileage claims over the years are inconsistent – If in the year 2022, you claimed 50,000 miles and in 2023 you claim 15,000 miles, the IRS will require some sufficient explanation for the drastic fall.
  • Your mileage claims are a round number – The chances that you will have driven 10,000 miles flat are rare. The figure will be more like 10,111.65 if you log your mileage with a mileage app.
  • Your total mileage for the year equals the total mileage claimed – It is virtually impossible to have driven throughout the year for business purposes only. If your total mileage is 10,111.65 miles, they would expect something like 422.74 miles out of those account for personal reasons.

Don’t raise red flags and make the IRS pay unnecessary attention to your claims.

There are varying ways to avoid paying high taxes. If you run a business that involves a lot of driving, you are advised to use the mileage deduction on your taxes to increase your net profit.

Use smart technology such as GOFAR to track and log your mileage.

The technology will help you find your engine’s sweet spot and then train you to drive more fuel efficiently.

Other areas where GOFAR can also help you include:

  • Fault finding and alerting you when it finds one
  • Translating the technical car malfunction jargon into plain English
  • Connecting you with the best part suppliers and mechanics in your area (only in Australia so far)

Ready to track and log your mileage the easy way? Go ahead.

Danny Adams sitting in a chair with a laptop

Danny Adams

Co-founder of GOFAR and with a Computer Science background from Harvard University, and a Bachelor of Aerospace, Aeronautical & Astronautical Engineering (Honours), UNSW. I want to transform data from cars into useful services so -> drivers save time & money -> emissions fall -> Australian roads are safer. So we built an ATO-compliant logbook app called GOFAR. I write to help you understand how to use GOFAR to maximise business travel. Reach out via support@gofar.co.

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This content is provided for general information purposes only and does not constitute professional advice from GOFAR. We recommend consulting with an independent legal, taxation, or financial expert to ensure the information is applicable to your specific situation. Please note that relevant regulations and laws may evolve over time.
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