As the tax season approaches, you might be wondering whether you can write-off gas on your taxes. After all, if you’re driving for work or running an errand for your business, it can add up quickly. However, the answer to this question is not as straightforward as you might think. In this article, we’ll explore the nuances of writing off gas on your taxes and help you understand what you can and can’t do.
Before we dive into the details, let’s first define what we mean by “writing off gas.” Writing off gas means deducting the cost of gas used for business purposes from your taxable income, thereby reducing the amount of taxes you owe. With that in mind, let’s take a closer look at the rules of writing off gas on taxes.
Personal vs. Business Use
The first thing to understand is that you can only write-off gas that you use for business purposes. If you’re using your car for personal use, you can’t deduct the cost of gas on your taxes. However, if you’re using your car for business, you can deduct the cost of gas as a business expense. Here are some examples of when you can and can’t write off gas:
- You can write-off gas if you’re driving to a business meeting
- You can write-off gas if you’re delivering products or services to a client
- You can’t write-off gas if you’re commuting to and from work
- You can’t write-off gas if you’re running personal errands
Standard Mileage vs. Actual Expenses
Once you’ve determined that you’re using your car for business purposes, you have two options for writing off gas: standard mileage or actual expenses. Here’s what you need to know about each option:
Standard Mileage
The standard mileage rate is a fixed rate that the IRS sets each year for the cost of operating a vehicle for business purposes. In 2021, the standard mileage rate is 56 cents per mile. If you choose to use the standard mileage rate, you can’t deduct the actual cost of gas, but you can deduct the standard mileage rate multiplied by the number of miles you drove for business purposes. For example, if you drove 1,000 miles for business purposes, you can deduct $560 (1,000 x $0.56).
Actual Expenses
If you choose to use the actual expenses method, you can deduct the actual cost of gas, as well as other expenses related to operating your vehicle for business purposes, such as insurance, repairs, and maintenance. However, you’ll need to keep detailed records of these expenses, including receipts and mileage logs. You’ll also need to calculate the percentage of time that you use your car for business purposes versus personal use. For example, if you use your car 60% of the time for business purposes, you can deduct 60% of your actual expenses.
Other Considerations
Before you start deducting the cost of gas on your taxes, there are a few other things to keep in mind:
- You can’t double-dip: If you’re reimbursed for gas or other vehicle expenses by your employer, you can’t also deduct those expenses on your taxes.
- You need to have documentation: Whether you’re using the standard mileage rate or the actual expenses method, you’ll need to keep accurate records of your business mileage and expenses, including receipts and mileage logs.
- You need to be honest: Don’t try to deduct gas or other vehicle expenses that you didn’t actually use for business purposes. The IRS takes a dim view of fraudulent deductions and penalties can be steep.
Conclusion
So, can you write-off gas on your taxes? The answer is a qualified yes. If you’re using your car for business purposes, you can deduct the cost of gas as a business expense, either using the standard mileage rate or actual expenses method. However, you need to ensure that you’re only deducting expenses that are legitimately used for business purposes and that you’re keeping accurate records. When in doubt, consult with a tax professional to ensure that you’re doing everything by the book.