Taking a cab to work won't win you any special favors from the Internal Revenue Service. These are commuting miles – it's a personal expense and you can't deduct the cost any more than you can deduct the price of your morning coffee. This isn't to say that you'll lose out on all work-related travel expenses at tax time, however. Cab fare is deductible under some circumstances, but a lot of catches exist, such as where you're going, why you’re going there, and where you started out.
The cost of getting to work is generally your burden to bear, but after you arrive at your work location, the IRS allows you deduct your costs if your employer sends you elsewhere. For example, a highly sensitive document might have to be hand-delivered to an office across the city, or you may have to attend a conference or meeting on the other side of town. If you take a cab, the cost is deductible. If you work two jobs, you can deduct the cost of getting from one job to the other, but not the expense of getting to the first one or returning home from the second. Special tax rules apply to temporary work locations. For example, if you're overseeing the opening of your employer's satellite office so you're reporting there rather than your usual work location, you can claim transportation costs. "Temporary" means the duty will last less than a year, and the secondary location must not be in the same metropolitan area as your main location.
Unfortunately, deducting your work-related cab fare isn't without a few complications. You must itemize to claim these deductions, which means completing and filing Schedule A with your tax return. Work-related expenses fall into the category of miscellaneous deductions, and this category is subject to a 2-percent rule. You can't deduct any expenses unless they total more than 2 percent of your adjusted gross income. Therefore, if your AGI is $80,000, you'll need $1,600 in expenses before you can claim the balance.
Other Work-Related Expenses
The good news is that you're not limited to cab fare when you're trying to reach 2 percent of your AGI. Miscellaneous work-related deductions include a host of other expenses in addition to travel costs. If you have to purchase any special equipment that helps you do your job, or special clothes specifically for work, these costs are deductible. You can also claim union dues, professional association fees, the cost of subscriptions, and even educational expenses if they're related to your job.
Other Qualifying Rules
The IRS imposes a few other rules for work-related expenses. Before you start tallying everything up, make sure each cost or fare is "ordinary and necessary." According to the IRS, ordinary means that most people who do what you do for a living could be expected to take a cab for the same reason you did. Necessary is just what it sounds like – the cost had to be incurred. Taking a cab to a meeting two blocks away wouldn't be necessary unless you couldn't possibly walk, such as because you're injured or because you must get to the other location very quickly.
IRS rules for deducting cab fare loosen up a little if you're self-employed. If you operate your business out of a home office, you can deduct the travel costs every time you leave home to take care of work, even if it's just a quick trip to the post office to buy stamps. If you have a separate work location, however, and if that's your principal place of business, traveling there from home becomes commuting, just as if you worked for someone else. If you're self-employed, you don't have to itemize to claim this deduction and it's not subject to the 2-percent rule.
Beverly Bird has been writing professionally for over 30 years. She is also a paralegal, specializing in areas of personal finance, bankruptcy and estate law. She writes as the tax expert for The Balance.