Can Gas & Vehicle Expenses for Work Be Counted as Tax Deductions?

You can include the cost of tolls with your vehicle expenses.

You can include the cost of tolls with your vehicle expenses.

Driving from job site to job site or to visit clients is a normal part of the job for many people, contributing to high gas bills and wear and tear on your car. The good news is, you might be able to write off some of your vehicle expenses when you file your taxes, although the rules are different for employees and the self-employed.

Actual Expenses vs Standard Mileage Rate

The Internal Revenue Service allows you to choose between deducting your actual expenses for business use of your car or claiming the standard mileage rate. Actual expenses include the cost of fuel and oil, maintenance and repairs, insurance, tires, depreciation, license fees and registration fees. The standard mileage rate is adjusted from time to time based on the cost of operating a vehicle. As of Jan. 1, 2012, the rate for business use of your car was 55.5 cents per mile.

Employee Business Use of Car

You can claim a tax deduction for any unreimbursed business use of your car. If you used your car 100 percent for business, you can deduct 100 percent of your expenses. Commuting expenses are not deductible. If you used your car for both personal and business use, you'll have to determine what percentage was used for business. You can write off only the proportionate amount of your expenses that relate to the business use of the car. For example, if you used your car 10 percent of the time for business, and you were not reimbursed for your expenses, you can write off 10 percent of your operating expenses or 10 percent of your mileage.

Employee Business Expenses

The IRS considers unreimbursed expenses for using your car for business while working as an employee to be part of your employee business expenses. These expenses are subject to the 2 percent rule. You can only deduct the amount of your employee business expenses that exceeds 2 percent of your adjusted gross income. You must itemize your deductions on Schedule A to claim a deduction for business use of your car.

Self-Employed Business Use of Car

The same usage rules apply to business use of your car regardless of whether you work as an employee or are self-employed, but there are important differences in how your car expenses are reported. If you are self-employed, you must report your expenses for business use of your car on Schedule C. There is no 2 percent limitation on Schedule C, and you can take the deduction for business use of your car whether you itemize your deductions or claim the standard deduction.


About the Author

Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.

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