While Zoom meetings can start to wear thin, removing the daily commute is a huge bonus afforded to those small business owners who are or who have already transitioned from a physical location to a permanent work-from-home setup.
Generally, the cost of travel between your home to your main workplace is a non-deductible commuting expense. But what if your main workplace is your home office? If you’re self-employed and meet the qualifications of a home office, a mileage deduction for business travel from your home office is allowed. For employees who meet the qualifications of a home office, a mileage reimbursement from the employer for business travel from your home is allowed.
For your home office to qualify as your principal place of business, the space must be exclusively used for the business. Employees must also show that the home office meets the “for convenience of the employer” test to qualify.
An employee’s home office is deemed to be for an employer’s convenience only if it is:
- a condition of employment
- necessary for the employer’s business to properly function, or
- needed to allow the employee to properly perform his or her duties.
This test is not met if you simply use a home office for your convenience or because you can get more work done from home. Employees who are unable to meet these requirements will not be allowed a mileage reimbursement.
Even if you qualify for a home office deduction as self-employed person or employee, you will also need to maintain adequate records to substantiate your mileage, such as a log or record-keeping app through your smart phone to claim a deduction. You should include the date, the mileage (preferably the beginning and ending odometer readings), and the business purpose for each trip.
This will be especially important if you are using the standard mileage rate method rather than the actual expense method in 2022. The IRS raised the standard mileage rate from 58.5 cents per mile to 62.5 cents per mile effective July 1st in response to the increase in gas prices nationwide. You will need to track your mileage for the first half of the year and the last half of the year to maximize your deduction.
If you are working from your home, Padgett’s nationwide network of trusted small business advisors and tax professionals can help you determine if you qualify for these deductions to maximize your tax savings. Find an office near you today!