Whether you are self-employed or an employee who uses their car for work purposes, you may be eligible to deduct certain car expenses from your taxes. However, one common question that arises is whether it is better to write-off gas or mileage. The answer to this question can greatly affect your tax savings, so it is important to understand the differences between the two methods.
Before deciding on which method to use, it is important to understand the difference between gas expenses and mileage expenses. Gas expenses refer to the cost of fuel used for business purposes, while mileage expenses refer to the cost of using your vehicle for business purposes, including gas, maintenance, and depreciation.
Gas Expenses
When it comes to writing-off gas expenses, you can deduct the actual cost of gas used for business purposes. This means that you will need to keep track of all your receipts and calculate the total amount of gas used for business purposes. While this method may be more accurate, it can also be more time-consuming, especially if you use your car for both personal and business purposes.
Furthermore, there are limitations to deducting gas expenses. The IRS only allows you to deduct the portion of gas expenses that were used for business purposes. If you use your car for both personal and business purposes, you will need to calculate the percentage of gas used for business purposes.
Mileage Expenses
Mileage expenses, on the other hand, are calculated based on the number of miles driven for business purposes. The IRS provides a standard mileage rate that is used to calculate the deductible amount. For 2021, the standard mileage rate is 56 cents per mile driven for business purposes.
Using the mileage method can be more convenient and less time-consuming than tracking gas expenses. However, it is important to keep accurate records of the number of miles driven for business purposes. You can do this by keeping a mileage log that records the date, destination, purpose, and number of miles driven for each business trip.
Which Method is Better?
Deciding on which method to use ultimately depends on your specific situation. Here are some factors to consider:
- If you use your car for both personal and business purposes, the mileage method may be more beneficial since it takes into account all car expenses, including gas, maintenance, and depreciation.
- If you use your car primarily for business purposes, the gas method may be more beneficial since you can deduct the actual cost of gas used for business purposes.
- If you are unsure which method to use, you can calculate both methods and choose the one that provides the greatest tax savings.
Final Thoughts
When it comes to writing-off gas or mileage expenses, it is important to keep accurate records and choose the method that provides the greatest tax savings. Whether you choose to use the gas method or the mileage method, make sure to consult with a tax professional to ensure that you are following all IRS regulations and maximizing your tax savings.