I have not seen this subject addressed in any of your fine articles regarding deductions for traders, and am sure it applies to many of us. The majority of my trading (90%) is done at an office location rather than my home for many reasons, primarily faster and more reliable computer equipment. Are traders allowed to deduct any expenses related to commuting to our trading locations?
-- Gary Lamb
Mileage deductions are for self-employed people or employees who don't get reimbursed by their employers.
But commuting costs to and from your office are not deductible -- for anyone.
Here's a mileage deduction refresher:
Any business-related driving you do with your own car is deductible. If you do not get reimbursed for those miles, you can deduct them. If, as a trader, you leave your office to meet the management of a company you're planning on investing in, you can take a deduction for those miles to and from your office.
If you qualify for a
home office deduction, your principal place of business is your home. You can take a mileage deduction for the roundtrip driving you do from your home to see clients and customers.
How Much Can You Deduct?
There are two ways to determine your mileage deduction: the standard mileage rate -- a flat rate per mile -- or the actual cost method, which requires you to add up your auto expenses and figure out the percentage of their use that applies to your business.
If you lease a car you can use either method, but if you choose the standard rate you must continue using that method for the length of the auto's lease. If you want to use the standard rate for a car you own, you must use it in the first year the car is used for business. You can switch methods in future years.
Jan. 1 through March 31, 1999
April 1 through Dec. 31, 1999
Jan. 1, 2000 through present
reported the mid-1999 drop to 31 cents early last year.)
The actual cost method requires more work but may give you a bigger deduction. Total up the costs to operate your car -- include gas, insurance, oil changes, registration, repairs, washing and waxing, etc. Then compare the total miles you drove for business to the total miles you drove for the year. And apply that percentage to your total costs.
Regardless of the method you choose, make sure to tack on tolls and parking costs as part of your deduction.
Where To Report the Mileage Deduction
Self-employed people will report this expense on
-- Profit from Business and Loss
If you are an employee, you must complete
-- Employee Business Expenses
. From here, your total will flow to line 20 of
-- Itemized Deductions
, as an unreimbursed business expense. Note you can only deduct the amount above 2% of your adjusted gross income. So you may not get the full amount back.
That's why it's actually better to be reimbursed by your employer. Your employer will use the standard method but the money will come back to you without any taxes withheld.
Be sure to keep a log of the miles you drive for business and the associated expenses.
For more on deducting driving expenses, check out
-- Travel, Entertainment, Gift and Car Expenses
If you are a volunteer or attending a charitable event, you can take a mileage deduction for your round trip to the charitable organization. And if you drive to a clothing drop-off to donate clothes and other items, those miles are deductible as well.
While you do have a choice between the standard-rate and actual-cost methods, your actual costs are limited to gas, oil and other costs directly related to the daily use of your car. Repairs, maintenance, and general upkeep are not included here.
If you don't want to take the time to figure out your actual costs, you can deduct a flat 14 cents per mile to and from the place of charity.
You also can include parking and tolls.
Send your questions and comments to
firstname.lastname@example.org, and please include your full name. Tax Forum appears daily through April 17.
TSC Tax Forum aims to provide general tax information. It cannot and does not attempt to provide individual tax advice. All readers are urged to consult with an accountant as needed about their individual circumstances.
As originally published, this story contained an error. Please see
Corrections and Clarifications.