Agents: What Qualifies as Business Mileage for Tax Purposes?

By
Real Estate Sales Representative with Royal LePage / Moneyledgers Software

Agents will typically spend a good part of the day in their vehicle conducting business in the local market... this article will discuss...

  

... what is considered a deductible local business trip? 


Costs of local travel are deductible if:

  • They are ordinary and necessary for your business
  • The cost is common, helpful, appropriate for business
  • Not considered a "commute" (from home to  office)

 

This chart may help:

 

agent mileage deduction for tax purposes chart

 

Notes and Explanations:

 

Home Offices and Commuting (2 Scenarios):

#1: If you do not have a home office that qualifies as your principal place of business, then all trips made between your home and your brokerage office are considered commutes and are not deductible.

  • Stopping at a work location on a commute makes the entire trip into a deductible expense.
  • Putting a business sign in your car window will not allow you to deduct a commute.
  • Talking with clients on the cell phone during will not allow you to deduct a commute.

#2: If you have a home office that qualifies for the home tax deduction, you can deduct trips from your home to another business location.  Business trips from your home office to any temporary work-related location, (including the brokerage office) are fully deductible.

 

FOR IRS Bulletin click here


 

Trip Examples: 

You CAN Deduct when:

  • driving from home office to brokerage
    (when home office IS your principal place of business)
  • driving to properties
  • driving to open houses
  • driving to meet clients
    (except if considered a commute from home to your broker office)
  • driving to deal with offers
  • driving to real estate training
  • driving to do business banking
  • driving to buy business supplies
  • use of your car by another person for something connected with your business

 

You CANNOT Deduct when:

  • Commuting from home to your brokerage office
    (when home office is NOT your principal place of business)
  • trip to the grocery store for personal shopping
  • trip to church or club meeting for personal reasons
  • for any trips unrelated to business 
  • commutes are not deductible because you make business calls on your cell phone on the route.

  

LEGAL CASE IN POINT:  click here for details
https://www.ustaxcourt.gov/InOpHistoric/moorewilliej&thelma.sum.WPD.pdf

According to petitioner, “anytime you’re moving, you’re actually in business”. So, for example, “when you drive to the grocery store, you will transact business.”

In this regard, when asked by the Court  "what part of the grocery store was most conducive to conducting his business", petitioner replied as follows:  I would say the meat section, where they have the chips and all that good stuff. That’s where people stop, and the fruit section; that’s where I, you know--and if you’re an agent and people know you’re an agent, they will stop you and you will--you know, just have a conversation with them. If they’re in the store and you pass a [business] card out.

THE COURT: I mean, do you wear a sign that says, I’m an agent, and stop them–- the deduction was disallowed. In the words of the court: "We find petitioner’s theorem regarding the transmutation of nondeductible personal expenses into deductible business expenses through kinesis to be so fundamentally flawed that we reject it without further discussion."

...Happy Travels!


 Our Products and Services:

** FREE tax deduction checklist for Real Estate Agents: click here
** bookkeeping software for real estate agents: www.agentledgers.com
** virtual bookkeeping services for real estate agents: www.myvirtualbookkeeping.com 


Note: This is general information to help you gain an understanding of U.S. tax laws. I am not a tax attorney or tax preparer. Please consult a qualified expert when you are preparing your tax returns or making tax-related decisions.

 

Comments (6)

Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Steve, I have always done actual miles, and keep a small spiral notebook in the driver's door, and keep track of the miles, and keep a running total for the year.

Dec 01, 2017 12:41 PM
Steve Penner

excellent... just keep in mind that this article is about "when" .. and not about the "how" of tracking miles.  I changed the article heading ... as it may have been confusing.  Thanks for commenting!

Dec 01, 2017 12:43 PM
Jim Smith
The Property Management Company - Round Rock, TX
Broker,CRS,GRI,RMP,CNE,TRLP

This is a good, simplified explanation of the deduction allowances.  Thank you for the information; and, it will be shared with my agents!

Dec 02, 2017 06:13 AM
Steve Penner

"Keeping it simple" is a great motto ... yes certainly feel free to share the info.. "pay it forward" as they say :)  ... you are welcome!

Dec 02, 2017 07:27 AM
Jim Cheney
Saint Francis Property Santa Rosa, CA - Santa Rosa, CA
Rincon Valley Realtor 707.494.1055

Great info Steve Penner , and nice links!

Dec 02, 2017 07:20 AM
Steve Penner

yes, the links can help flush it out... glad you enjoyed it.. thanks for the feedback!

Dec 02, 2017 07:28 AM
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Thanks for this valuable information, Steve.  I hope my accountant knows all of this.

Dec 03, 2017 04:46 AM
Steve Penner

Yes... and certainly sonething to keep in mind as an agent... as trips can be structed to best advantage when guidelines are known.

Dec 11, 2017 05:22 AM
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Real Estate Agents - Luxury - Divorce

I  suspect that technology has made a large dent in this deduction...unless driving your email counts !

Dec 12, 2017 02:37 AM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good morning Steve Penner ,

I'm so glad that Gabe Sanders re-blogged your post as I missed it! Welcome to Active Rain and I look for future posts written by you. I just subscribed to your post. Good valuable information especially at this time of the year when we begin pulling our receipts together.

Dec 12, 2017 04:18 AM
Steve Penner

Thanks so much Dorie, look forward to interacting, learning, and adding value as we go.

Dec 12, 2017 07:39 AM

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