Deducting Mileage Vs. Gas Receipts for Business Expenses
The Internal Revenue Service allows you to claim unreimbursed business expenses as a deduction if you itemize your deductions. The category includes the use of your personal vehicle for work-related activities.
In most cases, you can choose to use the IRS standard mileage rate for business miles or claim your actual expenses, but certain circumstances may restrict you to only one choice.
Choosing a Deduction Type
To claim the standard mileage rate for miles driven in a vehicle you own, the IRS requires you to base your deduction on the standard rate for the first year in which your vehicle is used or available for use for work-related tasks. In subsequent years, you have the option to deduct actual vehicle expenses or continue to use the standard rate. However, if you lease your vehicle, you are locked in to the standard rate for the duration of the lease term. You cannot use the standard rate if you have at least five vehicles in simultaneous use for business purposes. If your employer furnishes the car that you use for work-related purposes, you cannot use the standard rate.
Your deduction for actual expenses includes more than just your gas receipts. You can include the cost of oil, tires, registration, insurance and repairs. If you lease your vehicle, you can include your payments; if you own your vehicle, you can include depreciation on your vehicle. However, if you use the same vehicle for both personal and business driving, you must prorate the expenses based on business miles driven versus personal miles driven. To do this, divide total business miles by total personal miles, then multiply the result by the expense.
Which method is more advantageous depends on your specific situation. The standard mileage rate includes an allowance for expenses that you could typically claim as actual vehicle expenses, such as insurance or registration. The IRS normally changes the rate annually, but as an example, it was 53.5 cents per mile in 2017 and 54.5 cents per mile in 2018. Regardless of which method you choose, you can include any tolls or parking you pay that are not personal commuting expenses, such as parking near your normal work location. Whatever you choose, remember to document your expenses, whether that means keeping a mileage log or saving the fuel receipt when you purchase gas.
Claim the deduction on line 21 of Schedule A of the 1040 tax form when you itemize your 2017 deductions.
You are only permitted to deduct for expenses for which you were not reimbursed. If you received mileage or gas reimbursement from your employer, you can't deduct those costs. If your employer paid only part of your expenses, you can deduct the remainder. The expenses must be appropriate for and beneficial to your business. You must incur or pay the expense during the year for which you are claiming the deduction. You will also need to complete IRS Form 2106; you may use Form 2106-EZ if you receive no reimbursement and are applying the standard rate instead of claiming actual expenses.
Changes for 2018-2025
An increase in the standard mileage rate is not the only import change for the new tax year. Unpaid employee mileage is no longer deductible as of 2018. Self-employed individuals will still be able to claim the mileage deduction, as well as other business-related travel expenses, on Part III of Schedule C.
- Internal Revenue Service: Publication 463 — Travel, Entertainment, Gift and Car Expenses
- Internal Revenue Service: Publication 529 — Miscellaneous Deductions
- Internal Revenue Service: Form 2106
- Internal Revenue Service: Topic Number 510 - Business Use of Car
- Internal Revenue Service: Standard Mileage Rates for 2018 Up from Rates for 2017
Jeffrey Joyner has had numerous articles published on the Internet covering a wide range of topics. He studied electrical engineering after a tour of duty in the military, then became a freelance computer programmer for several years before settling on a career as a writer.