As a small business owner, you may be wondering if you can write off gas expenses for your business. After all, gas prices can add up quickly, especially if you use your vehicle for business purposes. The good news is that the answer is yes, you can write off gas for your small business, but there are some important things you should know before you do.
In this article, we will explore the different aspects of writing off gas for your small business. We will discuss what qualifies as a business expense, what documentation you need to keep, and how to calculate your deduction.
What Qualifies as a Business Expense?
In order for gas expenses to be considered a business expense, they must be incurred while using your vehicle for business purposes. This can include driving to meetings, traveling to job sites, or making deliveries. If you use your vehicle for personal reasons, those expenses cannot be written off.
It’s also important to note that the IRS considers commuting to and from your regular place of business as a personal expense, so you cannot write off gas for your daily commute. However, if you have a home office and drive to meet clients or conduct business, those expenses can be written off.
What Documentation Do You Need?
When writing off gas expenses, it’s important to keep accurate records and documentation. You should keep a log of your business miles and the purpose of each trip. This can be done manually or with the help of a mileage tracking app. You should also keep all gas receipts and credit card statements as proof of purchase.
If you use a company car or lease a vehicle, you should keep all documentation related to the purchase or lease agreement, as well as maintenance and repair records.
How to Calculate Your Deduction
There are two methods for calculating your gas deduction: the standard mileage rate method and the actual expense method.
The standard mileage rate method allows you to deduct a set amount per mile driven for business purposes. In 2021, the standard mileage rate is 56 cents per mile. To calculate your deduction, simply multiply the number of business miles driven by the standard mileage rate.
The actual expense method allows you to deduct the actual costs of operating your vehicle for business purposes, including gas, oil changes, repairs, and maintenance. To use this method, you will need to keep track of all your expenses related to your vehicle and calculate the percentage of time it was used for business purposes. You can then deduct that percentage of your total expenses.
Writing off gas for your small business can help you save money on your taxes, but it’s important to follow the rules and keep accurate records. Remember that only business-related gas expenses can be written off, and that you cannot write off commuting expenses. Keep detailed records of your business miles and gas expenses, and choose the method that works best for your business when calculating your deduction.
With these tips in mind, you can confidently write off gas expenses for your small business and keep more money in your pocket.