Commuting expenses are any type of costs that are associated with traveling to and from sites while engaged in work related activities. Expenses of this type are usually submitted on an expense account to an employer, who then reimburses the employee for any allowed out of pocket costs. Depending on current tax laws that apply in the jurisdiction where the employee and company are located, commuting expenses may or may not be allowed as tax deductions.
In many areas, commuting expenses are considered a subset of business travel expenses. While travel expenses may include costs such as entertainment for clients, airfare, food, and lodging during a business trip, this particular form of cost focuses solely on actual transportation expenses that have to do with ongoing travel to and from the place of business. For example, an employer may choose to pay the costs associated with an employee living out of town for driving to and from work each day, if that is part of the employee’s benefit package. Typically, this takes the form of paying the employee a fixed rate per mile or kilometer traveled. Like all travel expenses, the employee will supply an expense report that includes details on the travel, including the mileage involved and the total amount of the expense request for the period covered.
Whether or not commuting expenses are tax-deductible varies from one area to another. In some nations and even within different jurisdictions within countries, employees must report any reimbursements from employees as income on the tax returns. When this is the case, any legitimate transportation expenses that are not reimbursed can also be used as a deduction. Tax laws in other jurisdictions do not require reporting of the reimbursement as income and do not consider any balance of the costs that are not reimbursed to be counted as a deduction, but classified as personal expenses. Exceptions are sometimes made, especially if the employee has as the primary place of work his or her home but is required to commute to an employer site on occasion.
Business owners may also log commuting expenses when engaging in travel on behalf of a business. Typically, a form must be used to document the expenses before any type of reimbursement takes place, and the activity is recorded in the company’s accounting books using generally accepted accounting principles. As with employees, there is some variance as to whether the costs can be claimed as deductions and if the reimbursements must be counted as income. In order to properly determine if taxes are due or if unpaid commuting expenses can be legitimately used as tax deductions, it is important to consult a tax professional prior to filing annual tax returns.