Lessons from the Tax Court: Commuting deduction a mirage

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in Small Business Tax,Small Business Tax Deduction Strategies

The tax landscape is littered with losing cases in which a taxpayer tried to deduct travel expenses for commuting to a permanent work site. No matter how far away the site is and how long it takes you to get there, the Tax Court will likely disallow any deduction.

Latest example: For three years, from 2008 through 2010, an engineer drove approximately 160 miles a day to and from his job at a remote site in the Nevada desert. He claimed there was no method of public transportation that could accommodate this long-distance commute.

The engineer kept no logs or other records of his expenses. On his 2010 tax return, he claimed a deduction of nearly $30,000, most of it attributable to travel to the remote job site.

The Tax Court turned down the deduction. Because the work assignment wasn’t temporary, the taxpayer isn’t entitled to any deduction for the travel. Commuting is purely a personal expense. (Cors, TC Memo 2013-240)

For these purposes, a “temporary assignment” in a single location is one that is realistically expected to last (and in fact, does last) for one year or less. However, if the job is indefinite, the location of the assignment effectively becomes your new “tax home,” so you can’t deduct the travel expenses.

Tip: Don’t ignore the tax consequences when you contract for away-from-home assignments.

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