Understanding how to claim deductions for transportation costs can help lower your small business’s tax burden. Each year, you and your employees likely incur various local transportation 
expenses that carry tax implications.
What is Local Transportation?
Local transportation refers to travel that doesn’t require you to be away from your tax home long enough to need sleep or rest. Your tax home is the city or general area where your main workplace is located. If you’re away from your tax home for extended periods requiring rest, different tax rules apply.
Commuting vs. Business Travel
It’s important to note that commuting costs are not deductible. This includes the cost of travel between your home and your workplace, even if you perform work tasks during the commute, such as making calls or working on a laptop.
An exception exists for temporary work locations outside your metropolitan area. If your work at a temporary location is expected to last (and does last) no more than one year, commuting to that site may be deductible.
Business Travel from Work Locations
Once you arrive at your workplace, any local travel for business purposes is deductible. For example, driving from your office to meet a client, pick up supplies, or visit a business partner can be claimed as a business expense. Similarly, travel between two business locations is deductible.
Keeping Records
To claim these deductions, maintain accurate records.
- For taxis or public transit: Save receipts or log the date, amount, destination, and business purpose.
- For personal vehicles: Track mileage, noting the miles driven for business, along with tolls and parking fees (keep receipts).
You can calculate your deduction using one of two methods:
- Standard Mileage Rate: For 2024, this rate is 67 cents per business mile, plus tolls and parking.
- Actual Expenses: Deduct the business portion of car expenses such as gas, repairs, insurance, and depreciation (subject to limitations). This method requires detailed records of all vehicle costs.
Employees vs. Self-Employed
Under the Tax Cuts and Jobs Act, employees cannot deduct unreimbursed local transportation costs from 2018 to 2025. This is due to the suspension of “miscellaneous itemized deductions,” which include employee business expenses. However, self-employed individuals can still deduct these expenses.
Starting in 2026, employees may again be able to claim business-related transportation expenses if their total miscellaneous itemized deductions exceed 2% of their adjusted gross income. Keep in mind, Congress may extend the suspension of these deductions.
Need Help?
If you have questions or want to explore how these deductions apply to your situation, feel free to reach out to us. We’re here to help.
