If you have to drive for your job, you know that gas bills can add up quickly. Personal gas expenses aren't tax deductible, but mileage expenses incurred while working are. You can deduct the mileage expenses that your employer doesn't reimburse you for on Form 2106 of your tax return. If your employer does reimburse you, you may or may not need to pay taxes on the reimbursement amount.
How to Calculate Expenses
The cost of gasoline isn't the only expense involved in using a car. The Internal Revenue Service allows taxpayers to include the cost of gas, maintenance, insurance, licenses, registration, parking fees and lease payments into mileage expenses. If you're meticulous about keeping records, you can calculate your mileage expenses using your actual expenses throughout the year. If you're not inclined toward calculations and record-keeping, you can multiply the miles you drove for your job by the current IRS standard mileage rate to calculate your mileage expenses.
Reimbursements Under Accountable Plans
If your employer reimburses you for use of your car under an accountable plan, you may not need to report the reimbursement on your tax return. An accountable plan means that your employer's policy details and record-keeping meet the IRS standards for a qualified plan. If you're unsure whether your employer's plan is an accountable plan, talk to a human resources or operations representative at your work. If your employer does indeed maintain an accountable plan, you won't need to pay taxes on the gas reimbursements you receive. Since you already received reimbursement for costs incurred, you can't get an extra deduction from the IRS for gas expenses.
If your employer didn't reimburse you for your mileage expenses, you have the opportunity to get a deduction for them at tax time. In order to claim the deduction, you must itemize your deductions rather than taking the standard deduction. You can claim unreimbursed job expenses, including gas expenses, as a miscellaneous deduction on Form 2106. Unfortunately, you can only claim miscellaneous deductions in excess of 2 percent of your adjusted gross income. For example, if you have $3,000 in total miscellaneous deductions and your adjusted gross income is $40,000, the first $800 of miscellaneous expenses aren't deductible.
If your employer reimburses you for gas expenses and doesn't have an accountable plan, the reimbursements will be taxable. Luckily, you don't have to worry about keeping track of the reimbursements. Your employer will include any taxable reimbursements on your annual W-2, so you'll record them along with other taxable wages. It's possible that your employer reimbursed some, but not all, of your gas mileage expenses. If this is the case, you may deduct any expenses you weren't reimbursed for on Form 2106.
Based in San Diego, Calif., Madison Garcia is a writer specializing in business topics. Garcia received her Master of Science in accountancy from San Diego State University.