The IRS has ruled that you “may deduct daily transportation expenses incurred in going between your residence and a temporary work location outside the metropolitan area where you live and normally work.”
In this favorable ruling, you find two possible impediments:
- Temporary work location
- Metropolitan area
Temporary Work Location
The “temporary work location” is a location where you realistically expect that the work at this location will, and does in fact, last for one year or less. The temporary work location rule applies both inside and outside your metropolitan area.
Metropolitan Area
In an audit of Edward Harris, a surveyor, the IRS disallowed 23,000 business miles because Harris was inside his metropolitan area when he drove from his home to work locations that required round trips of 100 to 162 miles. In this audit, the IRS considered the Los Angeles Metropolitan Area as Harris’s metropolitan area.
Harris took the IRS to court, where he lost. But Harris thought the court decision unfair; he appealed it, and the Ninth Circuit in an unpublished opinion overruled the lower court on the metropolitan area definition and remanded the case back to the Tax Court.
Result. Harris kept the 23,000 deductible business miles for his trips from his home that were outside his metropolitan area.
So, what is the radius of your metropolitan area for this rule? Fifty miles from your home may be a good rule of thumb because:
- IRC Section 162(h) defines 50 miles as the local area for state legislators.
- Reg. Section 5e.274-8(a) defines 50 miles as the local area for a member of Congress.
- The federal government defines “metropolitan area” for IRS personnel and other federal employees as a mileage radius of not greater than 50 miles within or outside the limits of the physical location of an IRS office. This is consistent with the regulations in 5 CFR 550.112(j) and 5 CFR 551.422(d), and it’s found in Internal Revenue Manual section 6.550.1.1.7—Time Spent Traveling (last revised: 12-10-2009).
How to Totally Eliminate the Metropolitan Area Problem
If you have an office in your home that qualifies as a principal place of business within the meaning of section 280A(c)(1)(A), you may deduct daily transportation expenses incurred in going between your home and another work location in the same trade or business, regardless of whether the other work location is regular or temporary and regardless of the distance.
The principal office in the home creates:
- Business miles for trips from your home to your regular office
- Business trips to all temporary stops, whether inside or outside your metropolitan area—regardless of the distance
If you would like to discuss any of the rules in this article, please don’t hesitate to call us.
