Good news: Taking a seat on the metro rather than one behind the wheel isn't just good for the planet and good for your monthly budget. It can help out when you file your taxes too.
If you're a self-employed taxpayer, chances are you already know that you can write off your mileage when it's business related. But just because you're not using your vehicle doesn't mean you're not taking care of business. If you're on public transit while you're on the clock, there's a good chance you can claim that expense.
TL;DR (Too Long; Didn't Read)
Your business-related public transport is tax deductible if you're self-employed, but it is not deductible for commuting.
Public Transit Tax Deduction
If "Can I write off my bus pass?" is a question that pops up for you during tax season, here's the breakdown: You can write off your trips on public transit when they're made for business purposes, including rides on the bus, subway or metro train, taxi or ride share. Some examples might include traveling to a business meeting with a client, visiting a job site or taking a ride from one workplace to another.
As is always the case with deductions, documentation is key, so save that receipt for your bus pass. To make life easier, it's not a bad idea to get a separate transit pass just for business purposes; that way, you'll know exactly what you can claim when tax season rolls around.
Exceptions to the Rule
As a general rule of thumb, you can't claim commuting to and from your workplace on your federal taxes, whether you use your own vehicle or public transportation. While commuting write-offs are a no-go, you can write off the expense of traveling to temporary work sites.
Likewise, a public transit tax deduction is allowed when traveling from one workplace or work site to another but not when traveling from a workplace to your home.
2018 Tax Laws
The GOP tax bill passed in late 2017 makes for less tax benefits for commuters. Previously, businesses that offered parking or public transit benefits to their employees could deduct those expenses; for the 2018 tax year, that's no longer the case.
Employees who receive transportation benefits, however, will find their untaxed benefits unchanged or may have them deducted from their paychecks as pretax income. Keep in mind, though, that the new bill caps pretax contributions at $260.
2017 Tax Laws
Prior to the 2018 tax year, businesses can still deduct expenses incurred by offering public transit benefits to employees. For employees, pretax contributions are limited to $255.
Regardless of the tax year, self-employed transit deductions fall under travel expenses and typically go on your Schedule C or C-EZ as an unreimbursed business expense, or you can itemize them on Schedule A.
References
- Sweeter CPA: Deducting Travel Expenses When You Use Public Transit
- Bankrate: Don't You Dare Deduct These Expenses, But You May Be Able to Write Off Related Costs
- Zacks: What Transportation Expenses Are Deductible on My Federal Tax Return?
- Congress.gov: H.R.1 – An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018
- The Hill: GOP Tax Bill Has Transportation Advocates Scrambling
- Center for Urban Transportation Research at the University of South Florida: Commuter Tax Benefits
- TurboTax: Employees Can Deduct Workplace Expenses for Tax Years Prior to 2018
Writer Bio
Dan's decade-long experience as a freelance writer and small business owner has seen him contribute to financial publications including Chron.com, Zacks.com, MSN Money, Fortune, Motley Fool and others.