As a small business owner or self-employed individual, tax season can be a stressful time. One of the biggest questions that comes up when filing taxes is whether it’s better to write off gas receipts or mileage. Both options have their pros and cons, and the decision ultimately depends on your individual situation.
Before delving into the details, it’s important to understand the difference between the two. Writing off gas receipts means deducting the actual cost of gas that you’ve purchased for business purposes. On the other hand, writing off mileage means deducting a certain amount per mile that you’ve driven for business purposes.
The Pros and Cons of Writing Off Gas Receipts
One of the biggest advantages of writing off gas receipts is that you can deduct the actual cost of gas that you’ve purchased. This means that if you’ve spent a lot of money on gas for your business, you can potentially deduct a larger amount on your taxes. Additionally, if you have a gas-guzzling vehicle, writing off gas receipts may be more beneficial than writing off mileage.
However, there are also some downsides to writing off gas receipts. For one, it can be time-consuming to keep track of all of your gas receipts and add them up at the end of the year. Additionally, if you have a lot of business-related driving, you may end up with a large number of receipts to sort through. Finally, if you don’t have good records of your gas purchases, you may not be able to accurately deduct the full amount.
The Pros and Cons of Writing Off Mileage
Writing off mileage, on the other hand, is a simpler option that may work better for some people. One of the biggest advantages of writing off mileage is that it’s easy to calculate. You simply need to keep track of how many miles you’ve driven for business purposes, and you can then deduct a certain amount per mile (currently 57.5 cents per mile for 2020).
Another advantage of writing off mileage is that you don’t need to keep track of gas receipts. This can save you a lot of time and hassle, especially if you have a lot of business-related driving.
However, there are also some downsides to writing off mileage. For one, you may not be able to deduct as much as you would if you were writing off gas receipts. Additionally, if you have a fuel-efficient vehicle, writing off mileage may not be as beneficial as writing off gas receipts.
Which Option is Right for You?
Ultimately, the decision of whether to write off gas receipts or mileage depends on your individual situation. If you have a gas-guzzling vehicle and spend a lot of money on gas for your business, writing off gas receipts may be more beneficial. On the other hand, if you have a fuel-efficient vehicle and don’t want to deal with the hassle of keeping track of gas receipts, writing off mileage may be the better option.
It’s important to keep in mind that whichever option you choose, you need to keep accurate records of your business-related driving. This includes keeping track of the date, purpose, and number of miles for each trip.
The Bottom Line
When it comes to writing off gas receipts or mileage, there’s no one-size-fits-all answer. Both options have their pros and cons, and the decision ultimately depends on your individual situation. Whether you choose to write off gas receipts or mileage, make sure that you keep accurate records and consult a tax professional if you have any questions.
At the end of the day, the most important thing is to make sure that you’re taking advantage of all of the tax deductions available to you as a small business owner or self-employed individual.