For many of us, work often takes place outside the office. The commute from work to personal and back again is just one of the many journeys an employee can expect to make.
But the costs of these journeys can quickly add up, particularly for self-employed individuals.
While these may seem like work expenses, many of us are unsure how the costs affect our taxes.
Gas, and other costs related to running a car, can be tax-deductible if the journey was work related.
Even vehicles used for both personal and business purposes can claim these deductions on the miles used for work.
There are two methods for auto-related write-offs: standard mileage rate and actual expenses.
In this guide, we’ll cover what the methods entail, and how to choose the right one for you.
Can You Deduct Gas On Taxes?
Yes, you can deduct gas on taxes if the purpose of the journey has been business related.
If your vehicle is used exclusively for work purposes, then you are allowed to deduct gas, and other costs related to operation and ownership.
If you use your vehicle for both business and personal reasons, then there are still deductions available.
However, it is only possible to deduct costs related to the business usage.
Can Self-Employed People Deduct Gas On Taxes?
Yes, self-employed people can also deduct gas on taxes, provided the purpose of the journey was business.
Self-employed individuals are often better off using the actual expenses method, which we’ll cover below.
That’s because the actual mileage covered might be reduced, but other costs related to operating the vehicle add up.
Standard Mileage Rate Vs Actual Expenses
There are two methods that can be used to deduct gas on taxes. These are standard mileage rates, and actual expenses.
There are benefits and drawbacks to each system, so think carefully about how the car is used and the mileage before making your choice, as you can only claim with one method.
Below, we’ve given a brief overview of standard mileage rate and actual expenses.
Standard Mileage Rate
Standard mileage rate is one method used to deduct gas from your taxes.
Rather than simply deducting gas, the standard mileage rate gives a set deduction for each mile covered for business purposes.
The number of miles covered is then multiplied by the standard mileage rate as set by the IRS, and the result is the amount that can be claimed.
The standard mileage rate is updated annually, to match the current gas rates.
With standard mileage rates, you’re unable to claim gas as tax-deductible. This is because gas is included in the standard rate, alongside insurance and other expenses such as tires.
Standard mileage rate is the easier method, as it requires simply tracking miles, and multiplying the amount.
The actual expenses method covers every cost related to the car, including gas, insurance, repairs, and registration fees.
This amount is then multiplied by the percentage of time the vehicle was used for business purposes. If the car is only ever used for work, then you can deduct 100% of the usage.
If you use the car half for business, and half personal use, then you’ll multiply the total expense by 50%.
The actual expenses method can result in a higher saving, but the method does require a large amount of record keeping.
However, apps have been developed to make actual expense tracking easier, so you can claim all that you’re owed.
How To Choose Between Standard Mileage Rate And Actual Expenses
There are drawbacks and benefits to both standard mileage rate and actual expenses. Both options should be considered carefully before you opt for either deduction.
However, not all drivers are eligible for both methods, so check the eligibility requirements first.
If you want to use the standard mileage rate method at any point, then you must select this method in the first year you use the vehicle for work.
After this, you are able to switch between the two. If using a standard mileage rate for a leased car, the method must be employed for the entire lease period.
You must continue using it if you renew the lease.
By using the actual expenses method, you can typically claim a larger deduction. This is a fairly obvious benefit.
But in order to make the most of the deductions, it’s important to keep strict records. Otherwise, you won’t be able to claim correctly. Gas guzzlers benefit most from this system.
Standard mileage rate is the easier method to use, because it lacks the nuance.
While this might allow you to make quick savings, it does mean you might receive less than you would using the actual expenses method.
But sometimes, the standard mileage rate does work out more cost-effective.
Overall, the best thing to do is to carefully track your expenses. That way, you can add up the cost and work out which method will better suit your needs.
Can You Deduct Gas From Commuting On Taxes?
Unfortunately, the gas used to get you to and from work is not tax-deductible. The commute isn’t considered business use, and therefore is not tax-deductible.
Mileage can only be deducted if it occurred on a business related trip, and getting back home from the office doesn’t count.
However, trips to suppliers, traveling to work meetings, and even the drive to the airport before a conference all count as business related mileage.
A commuting mile is a mile that takes you from your workplace to your home. A business mile is between your workplace and another place of work.
Gas can be deducted from taxes, for both self-employed and internal staff, but only on work related trips.
Using the standard mileage rate or the actual expenses method, a person can claim for the money spent operating a vehicle for business use.
The most important thing is to keep extensive records of every expense, so you can work out which method is better for you and your tax return.