Deductability of Self-Employed Commuting Expense
Self-employment offers a lot in the way of tax perks and personal gratification, but it doesn't allow you to deduct commuting expenses. Given the Internal Revenue Service's definition of commuting, however, you can still claim some helpful deductions for your business-related driving and miles. Commuting means driving to your work location and back. All other miles offer tax advantages.
Your deductible miles depend on where your primary place of business is located. If you maintain an office at home, all your miles are typically deductible from the time you get behind the wheel and drive away to deal with anything related to your business. You might want to schedule your personal errands for another time, however. According to IRS mileage rules, if you drive to meet with a client, then return directly home, the entire trip is business-related. If you drive to meet a client then stop for a loaf of bread, you've complicated the issue. If you operate your business from somewhere other than your home, you can't deduct the miles you drive to that location – they're considered commuting. However, you can deduct driving costs from your business location to work-related activities, even if it's just dropping packages off at the post office.
Standard Mileage Rate Method
After you've separated your personal miles from your business miles for the year, you can use the standard mileage rate method and deduct 54.5 cents for every business mile driven as of 2018. You can also deduct tolls and parking costs if they're necessary to conduct business. For example, if you use your vehicle for both business and personal reasons, and if your total miles for the year amount to 24,000 and 12,000 of them were business-related, you can deduct $6,780. If you also incurred parking and toll expenses of $500, your total deduction comes out to $7,280.
Actual Expense Method
The actual expense method for claiming a driving deduction includes all the costs of operating your automobile for the year, including gas, maintenance, repairs, insurance, loan interest, and even depreciation. If you lease rather than own your car, you can include your lease payments. Like the standard mileage method, you can add in tolls and parking fees as well. If 12,000 of your 24,000 miles driven were work-related, you can deduct 50 percent of these costs. This method usually works out better if you're driving an SUV or some other gas-guzzler. If you only spend $10,000 on driving, your deduction would be less than that using the standard mileage rate. There's a catch with using this option, however. If you use this method the first year, you can't switch back to the standard mileage method in future years. If you're ever going to use the standard mileage method, you must do so in the first tax year that you own the car and use it for business-related reasons.
Claiming the Business Deductions
You can claim both the standard deduction and the auto deduction if you file Schedule C with your tax return as a sole-proprietor, because your auto expenses are considered business expenses. If you're a partner or a member of an LLC, the same applies, but you would claim those business expenses on Schedule E rather than Schedule C.
Beverly Bird has been writing professionally for over 30 years. She specializes in personal finance and w, bankruptcy, and she writes as the tax expert for The Balance.