When is travel considered deductible for independent contractors?

Independent contractors have an incentive to find all of the deductions they can, but sometimes there is a fine line between what is deductible and what’s not. Travel can be one of those confusing areas for many self-employed individuals. 

The main confusion comes in defining when a drive is a commute and when it is a deductible travel expense. The main factor in determining this is in defining where your principal place of business is. When you drive between your home and principal place of business this is considering commuting and is never deductible. However, when you drive from your principal place of business to another workplace this is considered a deductible travel expense. So, let’s define what is a principal place of business.

A principal place of business is the primary location where the work of that business is performed. It’s basically where the books and records are kept and where other administrative functions are performed.

  A home office can be considered a principal place of business if the following two criteria are met:

1.     This location in the home is used regularly and exclusively for performing the business and administrative functions for the business.

2.     There is no other location where the worker spends more time on these functions.

For freelancers, remote workers and others who work from home, their home is their principal place of business. Therefore, any business-related travel such as going to the post office or to a client’s place of business is deductible as a travel expense.

For some their also might be a special situation where they have a temporary workplace. A temporary workplace is defined as a place where a work assignment is expected to last less than a year and actually does last less than a year. Travel expenses between a home and a temporary workplace may be deductible. In order to be considered deductible the worker must have a principal place of business (this could be a home office or another regular workplace). If the worker has no principal place of business then travel expenses are not deductible unless you travel outside of the metro area where you live. Inside the metro area your travel is not deductible. If the assignment is later extended to beyond a year then the travel is not deductible for the period after you were notified of the extension. 

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