When can I deduct commuting expenses?

Question

I'm reading through Form 2106 and I can't figure out if I can deduct:

• Bus fare that I use to get to/from work
• Mileage etc. driving to/from work

When can you deduct these things?

Answer 1

Commuting expenses to and from work are not deductible. If you have a second job and go directly there from your first job, then you can deduct the expenses of traveling to your second job. If you are self-employed and your business is run out of your home, you can deduct the travel expenses to go to a client's site to do the work on Schedule C. If you have an office elsewhere, you cannot deduct the expenses of going to your office, but going from your office to a client site is deductible on Schedule C. Be aware that this deduction is often abused and the IRS knows it and often audits people whom it suspects are embroidering their deductions, and so it is important to keep meticulous records of your business travel.

Answer 2

This will not help for your taxes this spring, but it can help in future years, look into the IRS Pre-Tax commuter benefits. You will have to see if your employer participates in a program like this. The key is that your cost is taken out pre-tax. Federal Government employees can even get the Government to provide the funds as a benefit. Thus reducing their out of pocket costs even more.

Federal law allows employers three ways to reduce the cost of commuting via public transportation (bus, train, ferry or registered vanpool) or qualified parking for employees. Companies can offer employees:

1. tax-free employer-paid subsidy
2. pre-tax employee-paid payroll deduction, or
3. a combination of the above (shared employee- employer-paid)

Tax-exempt and pre-tax limits are set by the IRS. The following are the limits for the 2012 tax year:

• $125 per employee per month for vanpool, bus, ferry, rail (all public transportation)
• $240 per employee per month for qualified parking, or
• $365 per month per employee for both public transportation and qualified parking.

When the employee pays part or all of the cost of public transportation via a pre-tax payroll deduction, the employee can set aside up to $125 a month of pre-tax income. The employee saves federal withholding and FICA payroll taxes on the amount deducted. The employer saves paying FICA on the amount deducted. Employees may also share the cost with employers using after tax income. Pre-tax payroll deductions are referenced in the Internal Revenue Code, Section 132(F), as amended by TEA-21, Title IX, Section 910.