For many people, public transportation isn't a deductible expense. Public transportation used for personal reasons is never deductible. However, if you work from home, take overnight trips for your job or participate in an employer-sponsored payroll deduction plan, you may be able to deduct the cost of public transportation on your tax return.
Working from Home
If you work primarily from your home and use public transportation for business purposes, you can deduct 100 percent of these expenses from your taxable income. Your home qualifies as your principal place of business if you use it for most of your income-earning activities during the year, or if you use it as a base for administrative activities related to another fixed location.
Whether or not you are self-employed, you can deduct the cost of public transportation you use on qualifying business trips. To qualify as a business trip, you must take the trip for business purposes, and the demands of your job must require you to sleep or rest while you are away from home. If your trip qualifies, you can deduct train and bus expenses required for travel from your home to the business location. You can also deduct the cost of public transportation used to travel between a bus station or airport and your hotel, as well as transportation between your hotel and work locations.
If your employer assigns you to a temporary work location, you can deduct the cost of any public transportation you use to travel from your home to the temporary location. To qualify as a temporary assignment, you must expect the job to last less than one year, and the job must end before a year has passed. If the assignment exceeds one year, you must amend your tax returns to remove any travel deductions you took.
The IRS allows employers to help with the cost of public transportation by offering employees a pre-tax payroll deduction. At the time of publication, employees can allocate up to $125 of their earnings each month for public transportation and up to $365 each month for a combination of public transportation and parking expenses. Earnings set aside under this deduction are not subject to income taxes.
If you are deducting public transportation expenses incurred while traveling for your home-based business, claim the deduction on line 24a of Schedule C. To claim public transportation expenses incurred on business trips or temporary assignments as an employee, complete Form 2106. If you participate in payroll deductions, your employer must include the deductions on your W-2.
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