How to Use Your Home to Nullify the IRS Commuting Rules

Image from Wikimedia Commons by THOR

By qualifying your home office as the place where you earn the majority of your income, you are already at your place of work, and thus any movement from home to another location for business purposes is tax deductible.

Your home office will qualify as the primary location of work if you can prove to the IRS that you earn most of your income from there and that you perform your management and administrative tasks there.

Here are the essentials that can help you nullify the IRS commuting rules.

How Does the IRS Define Commuting?

The IRS defines commuting as transportation from your home to your office and back. In this case, “home” is the place you live whereas “office” is your primary place of business.

In other words, your home is the place you go to rest at the end of the day, and your office is the place you earn a majority of your income and the place where you conduct most of your management and administrative work.

What Are the General IRS Rules about Commuting?

The IRS has some complex rules around commuting. Despite the complexity, the IRS commuting rules (p.25) can be simplified into four major rules, which are:

  • As a general rule, any commuting is not considered allowable for mileage deduction purposes.
  • Even if you do work related tasks during your commute, the IRS will not allow you to convert it into business drive. Examples of such tasks include replying to emails, listening to work-related seminars or even holding a conference.
  • As a general rule, you can nullify all the IRS commuting rules by getting your home office accepted by the IRS as your principal place of business.
  • Drives between your home and any of your temporary job locations is an allowable mileage deduction

If you can find a way to work around the tricky points, you will have a huge tax saving.

Tips to Getting Your Home Qualified as an Office

Here are the detailed home office deduction requirements you need to know, and the essential home office tax strategies are explained in a nutshell in the video below:

So, you need to do the following:

1. Pass the Regular and Exclusive Use Test

Generally, to pass this test, you must prove that you use your home office regularly and exclusively for business purposes.

Your home office must be your principal place of business and/or the place where you meet customers or clients in the normal course of business operations.

For example:

  • If you have a separate room in your home that you use for business purposes and not for any other purpose, then you have passed the regular and exclusive test.
  • If you have a specific area that you use exclusively for business purposes and it is not a separate room, then you’ve met the regular and exclusive use test.
  • If you run a seasonal business and you use a room in your home exclusively for the business for a short period during the year, then you have passed the regular and exclusive used test for only the period that you’ve been using the room.

Exceptions to the rule:

  • You don’t need to pass the regular and exclusive use test if you use your home to store either inventory or product samples.
  • You also don’t have to pass the rule if you use your home as a daycare facility.

2. Pass the Primary Place of Business Test

You might have different places where you conduct your business.

However, to qualify your home for the IRS mileage commuting rules exemption, you must do the majority of your business tasks at your home office.

These tasks will include meeting clients, performing administrative tasks and the like.

The administrative and management functions that are considered by the IRS include:

  • Customer invoicing
  • Bookkeeping tasks
  • Appointment scheduling
  • Raw material requisition
  • Tax returns filing

In case you’re interested, here’s a bit more detailed explanation of how to write off a home office using TurboTax tool comparing bo the IRS regular and simplified home office deduction methods:

What Are the Effects of Temporary Work Location on Mileage Deduction?

The IRS commuting rule will NOT apply when you drive from home to a temporary place of work.

The IRS defines a temporary place of work as a place where you do not expect to work for more than one year.

Such a place of work might be in the metropolitan area where you live or it can be further out.

A temporary place of work is not limited to a client’s office only. It is any place where you expect to perform business-related activities for no more than one year.

If you drive from home and stop at a temporary place of work, you will convert the entire trip into an allowable deduction.

can you deduct business use of home expenses
Screenshot source: IRS Publication 587 – Business Use of Your Home

Tip:

If you have a temporary place of work between your home and your main office, you are encouraged to always drive there first. That way you can turn half of your mileage to the office into a business mileage and hence make it tax-deductible.

Once you have established that the drives from home to your temporary place of work are tax deductible, ensure that you start keeping a good mileage log using GOFAR.

Without proper contemporaneous documents to support your mileage claims, the IRS will reject your mileage deductions even if you have a legitimate claim to raise on your tax file returns.

Affordable and incredibly intelligent GOFAR business and mileage tracking app will help you to:

  • Understand the engine fails by alerting you whenever a fault arises
  • Understand the faults in plain English
  • Automate your business expenses and your mileage log book
  • Drive smart and therefore spend almost 10% less on fuel

This a free app is easy to install and doesn’t need additional tools to function.

If you want to make a huge saving on your taxes, converting your home into your primary place of work is a good place to start.

Apart from the many miles that you will be allowed to deduct, there are other numerous expenses that you can write off against your taxes. Our smart app won’t let them slip through the cracks.

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