Hopefully, you’re already tracking your miles in order to get the largest mileage deduction you’re entitled to. But, what counts as a business drive? Let’s go over what trips the IRS considers as business drives and what it doesn’t.
What the IRS counts as a business drive
The IRS understands there is a cost associated with using a personal vehicle for business purposes. That’s why you can take a deduction on your business drives. But, the IRS has clear definitions for what is a business drive.
Here is a list of clear-cut trips that the IRS considers as business drives.
If you take a trip for a business-related errand, that trip is a business drive. This could be going to the post office, bank or even going to Costco for supplies. This is a trip that many self-employed business owners forget to keep track of because they’re “little” or frequent trips. But these trips can add up at the end of the year to a large deduction.
The drives you take to meet clients or vendors qualify as a business drive. These could be the trips for a lunch meeting, coffee, happy hour or other things. Remember, the trip is a deductible business drive and you can deduct 50 percent of your entertainment expenses.
The miles you drive to and from the airport for business trips are business miles. If you’re concerned about parking for your work trip, but sure to check out Airport Parking for Business.
Do you have a side gig or a side hustle? Drives to and from odd jobs can be deducted. This could include babysitting, pet care, lawn work and more.
Driving from your office or another work site to meet with customers or clients for business qualifies.
Temporary job sites
Driving from home to a temporary work location that you expect to last (and does, in fact, last) less than one year.
If you’re looking for work, you may deduct the drives to find a new job in your current occupation. This doesn’t apply if you’re looking for a job in a new industry for the first time, though.
What definitely doesn’t count
Your drive from your home to your office is considered your commute and it’s never deductible. The same applies to the last drive from your office to your home. It doesn’t matter how far away your home is from your office, your commute is not deductible.
If you have a qualifying home office, you can get around the commuting rule. Because you have a home office, your first and last trip from home could be considered business miles. Be sure you know the requirements of the home office deduction, though.
Mixing business with personal trips
What happens if you mix a personal task with a business drive? For example, if you stop for coffee before meeting a client, does that one count? As always, it depends.
If you stop for coffee or lunch during a business trip, you are generally still allowed to count the entire trip as a business drive. However, if you run a personal errand like picking up a relative, you can’t count that portion of the trip for business.
You don’t have to throw out the entire trip but you cannot deduct more than the amount it would have cost you to go directly from the first location to the second. So, if picking up a relative added 14 miles to your trip, subtract that from the overall mileage of the business trip.
MileIQ’s blog does not constitute professional tax advice. You should contact your own tax professional to discuss your situation.