Recently we got a question asking about the tax deduction for the 1099 contractor. The caller wanted to know if he can deduct the travel expense from his home to his office.
In the San Francisco Bay Area, many of us are 1099 contractors, working for consulting companies or own our small business. With gas prices reaching $5 per gallon, it is no wonder that we are starting to pay special attention to the travel expenses.
The small answer, like always, to this question, is – Yes, but it depends.
You can deduct travel expenses from your office to your client site. Meaning, if you have a home office and you travel from your home office to your work than that expense can be deducted.
However, if you simply travel from your home to your work than that expense is not tax-deductible.
Set Up A Home Office To Take Tax Deduction.
Your home office should be a separate place in your home that is dedicated to your office. There is no special rule that defines what furniture or equipment you need to buy to claim a place as your office. However, your office should serve as your “HOME OFFICE”. Meaning you should be able to do an operational task from such a place. Moreover, this office space should not be used for personal use. It should be dedicated forth office use only.
With an increasing number of audits from the IRS, I suggest that you keep a picture of when your office was set up. Taking your home office pictures can also help strengthen your position in case of an audit. Making a list of things you do from your home office can also help you establish your home office.