Deductions may be on your mind if you're preparing to get your 2020 taxes finished and filed. Can you write off gas on your tax return? The answer comes down to why and where you're driving as part of your work. Take a look at what you need to know about taking advantage of tax deductions for gas costs.
First Things First: Is Gas Deductible If You're a Commuter?
Unfortunately, you cannot write off gas costs if you're an "ordinary" commuter. This means that the deduction is not available to you if you're one of the millions of Americans driving to their jobs daily. The length of your commute doesn't play a role in your eligibility.
When Is Gas a Deductible Expense?
Gas becomes a deductible expense only when you drive from the place where you conduct business to a different location that isn't your home. What does that look like in a real-world scenario? Imagine that you're going from the office to a client site.
The cost of the gas that you use to get there would be considered a deductible expense. That's because that travel time is considered to be outside of your "normal commuting time." The only caveat is that you can only deduct this expense if you are self-employed.
How Much Can You Deduct for Gas on Your 2020 Taxes?
When deducting gas costs, you're not actually deducting the dollar amount that you paid for gas. What you're actually doing is taking a deduction based on the mileage you've driven for business purposes using your vehicle. The IRS usually releases standard mileage rates for each year sometime in December.
When doing your 2020 taxes in 2021, you'll need to use the 2020 standard mileage rates that went into effect on Jan. 1 of 2020. Here's how much the IRS will permit you to deduct this year:
- 57.5 cents per mile driven for business use (down from 2019).
- 17 cents per mile driven for medical or moving purposes (down from 2019).
- 14 cents per mile driven in service of charitable organizations.
Read More: The Average Monthly Cost of Driving a Car
More on Deducting Gas
These rates apply for all cars, vans, pickups and panel trucks. The IRS determines these rates using the findings of an annual study of the fixed and variable costs of operating an automobile in the United States.
If taxpayers prefer, there is the option to calculate the actual cost of using your vehicle for specific business purposes instead of taking the IRS's standard mileage rates. However, you can only do this with a car that you own or lease. It's also important to know that the standard mileage rate can only be used for no more than five vehicles simultaneously.
Read More: 1099 Self-Employment Rules & Deductions
How to Stay Organized When Taking the Standard Mileage Deduction
It's necessary to maintain impeccable records of all business-related driving if you intend to write off driving expenses on your taxes. Ideally, this is something that you'll be building up to all year, instead of trying to cobble together a list of deductible driving expenses at tax time. Here's a rundown of the log to keep for each driving session that you intend to write off:
- The date of your trip.
- Starting point and destination.
- The reason for the trip.
- Odometer readings at the beginning and end of your trip.
- Round-trip mileage for the trip.
Don't forget that the costs associated with both tolls and parking can be tax-deductible. That applies whether you take the standard mileage deduction or do your own calculations. Of course, you must be able to provide records for any expenses you claim for tolls and parking.
Final Thoughts on Deducting Gas Costs
The 2020 IRS standard mileage deduction will almost certainly only apply to you if you're filing as a self-employed taxpayer. In all cases, keeping impeccable records of how far you travel is essential!
- H&R Block: If You Are Required to Use Your Personal Vehicle for Work, Can You Claim Gas on Taxes, or Do You Just Use the Standard Mileage Deduction?
- IRS: IRS Issues Standard Mileage Rates for 2020
- Internal Revenue Service. "IRS issues standard mileage rates for 2020." Accessed Feb. 3, 2020.
- Internal Revenue Service. "Standard Mileage Rates." Accessed Feb. 3, 2020.
- Cision PR Newswire. "Runzheimer Data Sets 2017 IRS Business Mileage Rate at 53.5 Cents." Accessed Feb. 3, 2020.
- U.S. Government Publishing Office. "H. R. 606." Accessed May 1, 2020.
- Internal Revenue Service. "Publication 463 Travel, Gift, and Car Expenses," Pages 13-15. Accessed Feb. 3, 2020.
- Internal Revenue Service. "Publication 526 Charitable Contributions," Page 6. Accessed Feb. 3, 2020.
Adam Luehrs is a writer during the day and a voracious reader at night. He focuses mostly on finance writing and has a passion for real estate, credit card deals, and investing.