Everyone at one time or another has wondered about deducting their work-related expenses from their income in order to pay lower taxes. Especially those expenses related to travel, whether these trips and excursions are to and from work or out-of-town. Federal law, specifically the Internal Revenue Code (“Tax Code”), allows individuals to deduct qualifying business expenses. What, if any, of a working taxpayer’s expenses related to travel are deductible as a business expense under the Tax Code?
U.S.C. § 162(a) relates to deductions for business expenses. Because it is the most widely used authority for deductions, it is one of the most important provisions of the Tax Code. The Code defines a deductible business cost or expense as “an ordinary and necessary expense that was paid or incurred during the taxable year in carrying on a trade or business activity. An expense is categorized as a “consumption” expense if not deductible as a business expense.
Under what circumstances are daily transportation expenses incurred by a taxpayer in going between the taxpayer’s residence and a work location deductible under U.S. tax law? A taxpayer’s costs of commuting between the taxpayer’s residence and the taxpayer’s place of business or employment generally are nondeductible personal expenses. However, the costs of going between one business location and another business location generally are deductible under § 162(a).
In Curphey v. Commissioner, 73 T.C. 766 (1980), the Tax Court held that daily transportation expenses incurred in going between an office in a taxpayer’s residence and other work locations were deductible where the home office was the taxpayer’s principal place of business within the meaning of the Code. The court reasoned that local transportation expenses incurred in travel between one business location and another are deductible should be equally applicable where the taxpayer’s principal place of business with respect to the activities involved is his residence.
IRS Revenue Rulings hold, in part, that, for a taxpayer who has one or more regular places of business, daily transportation expenses paid or incurred in going between the taxpayer’s residence and temporary work locations are deductible business expenses under § 162(a), regardless of the distance.
Another IRS Revenue Ruling provides several rules for determining whether daily transportation expenses are deductible business expenses under § 162(a). Under such, a taxpayer generally may not deduct daily transportation expenses incurred in going between the taxpayer’s residence and a work location. A taxpayer, however, may deduct daily transportation expenses incurred in going between the taxpayer’s residence and a temporary work location outside the metropolitan area where the taxpayer lives and normally works. In addition, a taxpayer must have at least one regular place of business located “away from the taxpayer’s residence” in order to deduct daily transportation expenses incurred in going between the taxpayer’s residence and a temporary work location in the same trade or business, regardless of the distance.
If you have a question or concern about any possible business deduction under § 162(a) of the Internal Revenue Code, whether related to travel or otherwise, you should contact experienced and reliable tax attorneys and CPAs at Thorgood Law Firm www.thorgoodlaw.com . For a FREE consultation call 212-490-0704.
