The Internal Revenue Service has detailed guidelines on deducting transportation expenses from your taxable income. While some public transportation fees are considered personal expenses, others qualify as a deductible business expense. Understanding this distinction can help you maximize your deduction and reduce your tax liability.
Ordinary Commuting Expenses for Employees
If you are an employee, you cannot deduct your ordinary commuting expenses. Ordinary commuting expenses are those you incur while getting from your place of residence to your workplace. In other words, public transportation expenses such as bus and subway fares to get from home to your workplace cannot be deducted from your ordinary income.
Deductible Local Transportation Expenses
Although you cannot deduct the commuting expense incurred while going from your residence to your regular work site, you can deduct the cost of going from one workplace to another. Say you take the bus to go from your home to the office in the morning and then take the subway to visit a client during the day. The subway fare is tax-deductible. Costs incurred while going to temporary work locations by public transportation can also be deducted. An engineer assigned to a construction site for a month, for example, can deduct the bus fare incurred while traveling to the construction site.
Home Offices and Second Jobs
If you have a home office that you use as your principle business location for your employer, the costs incurred while traveling from your home to work locations associated with your employment are potentially tax deductible. IRS's Topic 509 provides more information on the issue. If you have two different jobs provided by two different employers, the cost of traveling between these two jobs is also deductible. The fares you pay while going from either of these jobs to your residence or vice versa are not deductible, however.
The 2 Percent Rule
Even if the public transportation expense qualifies as deductible, you must meet the 2-percent criteria before you can itemize and claim it. The 2-percent rule states that the sum of your workplace expenses must exceed 2 percent of your adjusted gross income. If this condition is met, you can only deduct the amount that exceeds two percent of your adjusted gross income. Say, for example, you had adjusted gross income of $80,000 and workplace expenses of $1,900 during the year. Two percent of $80,000 equals $1,600. Since $1,900 exceeds $1,600 by $300, only $300 of your workplace expenditures are tax-deductible.
- BananaStock/BananaStock/Getty Images