The IRS classifies all car usage into three categories: business, commuting, and personal. “Business use” miles generally means travel between two business destinations. Examples of trips that are deductible include:
- Travel from one client or customer to another
- Travel from your office to perform business tasks, like pick up the mail, make a deposit at the bank, or buy office supplies
- Travel from one job to another
Vehicle expenses incurred in traveling from your home and your regular place of business are considered commuting expenses and, as such, are never deductible. Personal miles are those miles attributable to using your automobile that are not categorized as business or commuting. Personal miles may be further categorized into miles for medical purposes and miles for charitable purposes. Using your car to get to the doctor or to drive to a charitable organization to perform volunteer work is a deductible expense, but only as an itemized deduction, not as a business deduction. In 2013, the medical standard mileage rate is 24 cents per mile and the charitable mileage rate is 14 cents per mile.
If you have a home office, you can generally deduct the cost of traveling from home to any business destination. For example, if you are a real estate appraiser and your principal place of business is in your home, you can deduct the expenses incurred in traveling between your home office and the various properties you are appraising. True story, a friend of mine was a real estate appraiser and used her home as her principal place of business. She prepared her own tax return and had deducted mileage from her home office to various pieces of property she had appraised, and she had kept contemporaneous mileage logs. The IRS examined her return and, upon review, disallowed her home office. As a result, the mileage she deducted from her home office to her first piece of property to appraise was considered commuting mileage and not deductible.
I’ve had clients ask, “What if I’m talking about business on the phone while driving?” , is that business mileage? Simple answer is no. In order for mileage to be deductible as a business expense, you must have a business destination. Another example comes from my personal experience. When I drive to the bank to go to work, that is commuting mileage. When I leave the bank to go to MCC to teach for Tarleton, it is considered deductible business mileage, as I am traveling from one job to another. When class is over and I leave MCC to drive home, the return mileage is commuting.
As discussed in an earlier post, the business mileage on your car must be substantiated by contemporaneous logs. The IRS specifically asks you on the face of the tax return if you have written evidence of your automobile expenses. I cannot stress enough the importance of keeping records of the business use of your car.