How do you Distinguish between Business and Personal Mileage?
Add comment July 11th, 2008
 Tawn M. Jacobs, MST, CPA, CFP® For the remainder of the year, the standard mileage rate has been increased to 58.5¢ per mile; but just what mileage qualifies? Here’s a refresher using the most commonly encountered driving situations for employees and self-employed taxpayers, and how the mileage should be treated:
Overnight trips. Â When you drive from your tax home on an overnight trip that is undertaken primarily for business this is typically business mileage, even if there is some personal element to your trip (e.g., a visit with relatives). By contrast, if the trip is undertaken primarily for personal reasons, the mileage between tax home and destination is not business related even if you engage in some business activity at the destination.
Travel between two local business locations. This one makes the most sense in that this type of travel is treated as business travel whether the locations are related to one business or several.
Commuting. Driving from your home to your regular place of business or employment has always been personal travel.  Note: There are some other rules relating to having more than one regular places of business.
Travel between a home that’s the principal place of business and another place of work. Â If you have a home-based business (considered your principal place of business), you can deduct daily transportation expenses incurred while 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.
When is your home your principal place of business? There are two ways to qualify: A.    The statutory administrative/management activities test (that’s a mouthful) orB.    The comparative analysis test.
Under A, the principal place of business test is met if a portion of the home is used for the administrative or management activities of any trade or business of the taxpayer, but only if there is no other fixed location where the taxpayer conducts substantial administrative or management activities of that trade or business. Â (Some activity examples are: billing customers, clients or patients; keeping books and records; ordering supplies; setting up appointments; and forwarding orders or writing reports.)
Under B, the determination of a taxpayer’s principal place of business requires a comparative analysis of:
(1) Â The relative importance of the activities performed at each business location, and
(2) The time spent at each place, (i.e., the amount of time spent at the home compared with the amount of time spent in each of the other places where business activities occur).
Of course this is a brief overview of what mileage qualifies as business mileage. Make sure that you consult with your accountant to take advantage of all mileage deductions you may be entitled to.Â
