13

Consider someone who for either family or affordability reasons is unable to live in San Francisco, where they make their living.

Their daily commute is long. The cost of the commute is nontrivial, relative to the net salary.

Does the IRS offer any kind of reprieve? Are transportation or lodging costs deductible in any way?

Update

In case your thinking goes "Why should that be the case? They are making the choice to live far", it's worthwhile to mention here, ever so briefly, that such an incentive to commute would in the long run ammeliorate transportation networks (for example, trains run more often, paid by ticket revenue), which would encourage more people to avoid driving (even if the car is self-driven). And then those who continue to drive also will be happier, because they'll be able to breeze on the highways.

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    Comments are not for extended discussion; this conversation has been moved to chat. – Ganesh Sittampalam Aug 24 '17 at 20:24
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    Your last paragraph isn't clear. Are you suggesting that a tax break for commuters would allow the government to spend more on public transit? 1. How do you expect less revenue to allow more investment? 2. Why do you think the government would invest in transit rather than more roads (encouraging more commuting until the roads get jammed again)? [On second thought, don't answer, it's getting way off topic...but maybe you can make the last paragraph more clear] – The Photon Aug 26 '17 at 16:18
  • If you buy a house or condo near your work, your purchase will likely be subsidized by the mortgage interest tax deduction. So in that sense, the IRS does give you a deduction for lodging costs. If you rent, your landlord gets a deduction for her costs (including interest paid) and might pass that along to you in the form of lower rent. – The Photon Aug 26 '17 at 16:21
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    The question is totally sensible since many European countries e.g. Germany actually offer such deductions. However it doesn't seem to be the case in the US though, which is not that surprising. – xji Aug 28 '17 at 14:35
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    @JIXiang I don't think anyone is calling the question nonsense, but I don't think it's fair to address a single allowed deduction while ignoring the totality of a national income tax system. The US lets taxpayers deduct $6,350 of their income with no accounting or proof that an expense was even incurred (then on top of the standard deduction there are personal exemptions). To my knowledge Germany has no such standard deduction. – quid Aug 29 '17 at 17:47
43

When I have a question about my income taxes, the first place I look is generally the Giant Book of Income Tax Information, Publication 17 (officially called "Your Federal Income Tax"). This looks to be covered in Chapter 26 on "Car Expenses and Other Employee Business Expenses". It's possible that there's something in there that applies to you if you need to temporarily commute to a place that isn't your normal workplace for a legitimate business reason or other business-related travel. But for your normal commute from your home to your normal workplace it has this to say:

Commuting expenses. You cannot deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. These costs are personal commuting expenses. You cannot deduct commuting expenses no matter how far your home is from your regular place of work. You cannot deduct commuting expenses even if you work during the commuting trip.

26

No. Regular W2 employees cannot deduct housing or transportation costs related to their employment.

However, in the US, many employers offer Parking and/or Transit FSA programs which are usually collectively referred to a Commuter Benefits FSA programs, this is particularly common among larger employers with locations in major metropolitan cities. Under Commuter benefits FSAs employees can defer up to $255 per month from their gross pay, tax-free, for parking and/or transit expenses. Eligible expenses include things like bus and train passes or parking at a train or bus station.

These are money-in/money-out arrangements so expenses can only be claimed against contributions that have been made, unlike a Health FSA. Though, like a health FSA, contributions are subject to use-it or lose-it provisions.

These programs must be sponsored by the employer for an employee to take advantage of them though. Some jurisdictions mandate that employers above a certain threshold must offer commuter benefits.

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    This is the better answer vs Peter's, because it answers the question more thoroughly: no, you can't deduct expenses yourself, but FSA benefits come out of your gross pay, which offers an indirect reprieve in the sense that you're taxed on less income. Sadly, the $255/month cap is hardly enough to cover all commuting expenses in places like SF, but it at least helps. – Doktor J Aug 24 '17 at 15:59
7

You cannot deduct expenses directly. However, your employer may participate in programs to allow you to make a pretax deduction capped at $255 per month to pay for certain commuting expenses. For personal car commuters the main category is to pay for parking.

IRS guidelines

Qualified Transportation Benefits

This exclusion applies to the following benefits.

A ride in a commuter highway vehicle between the employee's home and work place.

A transit pass.

Qualified parking.

Qualified bicycle commuting reimbursement.

You may provide an employee with any one or more of the first three benefits at the same time. However, the exclusion for qualified bicycle commuting reimbursement isn't available in any month the employee receives any of the other qualified transportation benefits.

2

You cannot deduct commute expenses. Regarding your specific example, something to consider is that if the standard of living is higher in San Francisco, presumably the wages are higher too. Therefore, you must make a choice to trade "time and some money for commuting costs" for "even more money" in the form of higher wages.

For example, if you can make $50K working 2 hours away from SF, or $80K working in SF, and it costs you $5K extra per year in commute costs, you still come out ahead by $25K (minus taxes). If it ends up costing $20K more to live in SF (due to higher rent/mortgage/food/etc), some people choose to trade 4 extra hours of commuting time to put that extra $20K in their pocket. It's sort of like having an extra part time job, except you get paid to read/watch tv/sleep on the job (assuming you can take a train to work).

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    Right. You live so far away precisely because you save money (over the equivalent thing closer in). So the excess commute expense is part of your housing expense, and that's not deductible (well ITI on a mortagage is). – Harper Aug 24 '17 at 0:55
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    "you still come out ahead by $25K (minus taxes)" - Until you bother to factor in the life-, health-, and productivity-destroying aspects of a 4 hour daily commute. – aroth Aug 24 '17 at 7:04
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    @aroth - That's exactly the choice some people make. Some people have a full time job and also go to school at the same time which could easily be an additional 4 hours per day. Some people work full time and have a second 4 hour per day job. Some people work full time and also raise a family full time. Some people work full time and read a book for 4 hours a day during their commute. – TTT Aug 24 '17 at 14:15
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    Have you seen other drivers? They'll read / watch TV / sleep while driving. A train isn't needed. – Bryan Boettcher Aug 24 '17 at 17:26
-1

Short answer, yes. But this is not done through the deductions on Schedule A.

This can happen if the employer creates a Flexible Spending Account (FSA) for its employees. This can be created for certain approved uses like medical and transportation expenses (a separate account for each category). You can contribute amounts within certain limits to these accounts (e.g. $255 a month for transportation), with pre-tax income, deduct the contributions, and then withdraw these funds to cover your transportation or medical expenses. They work like a (deductible) IRA, except that these are "spending" and not "retirement" accounts. Basically, the employer fulfills the role of "IRA" (FSA, actually) trustee, and does the supporting paperwork.

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