Roads provide a significant benefit to the general population, so they are typically built with public money and open for use by the general public. But when state and municipal budgets get tight, tolls are sometimes instituted to help pay for road construction and maintenance. If you have to drive your car for business, those tolls can represent a part of the cost of doing your job that you can write off on your taxes.
Business owners and those that are self-employed can deduct tolls on their taxes if the travel was related to the business, but was not part of the individual's daily commute to and from the office.
Parking and Tolls and Tax
You can typically write off your actual expenses for using your car for business, or you can just use the Internal Revenue Service's standard mileage rate, which was 54.5 cents per business mile for tax year 2018 and 53.5 cents per business mile as of the 2017 tax year. Regardless of which method you choose, you can add in the cost of tolls and parking you incur for business travel and effectively deduct tolls on taxes . But you can't include any of the costs associated with commuting to and from your regular place of business.
If you work as an employee, you'll have to itemize your deductions on Schedule A of Form 1040 to write off your tolls and other car expenses, and the types of workers who can claim such deductions are limited after tax year 2017. The IRS considers them to be part of your employee business expenses, which fall under the category of miscellaneous deductions. Add the cost of tolls, parking, your other car expenses to your other employee business expenses and combine that amount with other miscellaneous expenses.
Miscellaneous expenses are subject to the IRS's 2 percent rule, which means you can only deduct the total amount that exceeds 2 percent of your adjusted gross income. If you don't have enough total itemized deductions to exceed the standard deduction, it's usually not worth itemizing.
You get a better tax break if you operate your car for your own business. The rules for what you can deduct are the same, so you can include tolls and parking with your other car expenses, but you report those expenses on Schedule C, rather than Schedule A. There is no 2 percent rule for Schedule C, and you can write off your business use of car expenses whether you itemize or claim the standard deduction.
Whether you work as an independent business person or as an employee, if you want to write off your car expenses, such as amounts you paid for tolls, you must keep a written record of those expenses. The IRS doesn't specify any particular method of record keeping, as long as it is accurate, but it does recommend keeping a mileage log in which you can record the business purpose of each trip if you're taking a business mileage deduction.
Other Mileage Deductions
You can also deduct mileage for travel for medical purposes and for charitable organizations, though at a lower rate than for business travel. The medical rate is 18 cents per mile in 2018 and 17 cents per mile in 2017, and the charitable rate is 14 cents per mile for both tax years.
2018 Changes to Miscellaneous Itemized Deductions
As of the 2018 tax year, you will no longer be able to claim miscellaneous itemized deductions in excess of 2 percent of your AGI on your tax return, even if you itemize your deductions, meaning employees can generally no longer claim business travel mileage. Mileage for moving is also generally no longer deductible as of 2018.
There are some exceptions to both rules. Members of the military reserves, state and local officials paid on a fee basis and some performing artists are still eligible for the employee mileage deduction under the new rules.
Active duty troops who move under military orders for a permanent change of station are also still eligible to claim moving expenses.
Self-employed workers are generally unaffected by the changes.
2017 Tax Rules
As of 2017, employees are still free to take miscellaneous itemized deductions greater than 2 percent of their AGI, including business mileage.
Taxpayers are also able to deduct mileage or actual expenses for moving for a new job through tax year 2017.
- Internal Revenue Service: Topic 510 -- Business Use of Car
- Internal Revenue Service: Publication 463, Parking Fees and Tolls
- Internal Revenue Service: Schedule A
- Internal Revenue Service: Schedule C
- IRS: Standard Mileage Rates for 2018 Up from Rates for 2017
- IRS: Update of 2018 Standard Mileage Rates Notice
Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.