As a small business owner working hard to get your company off the ground, you understand that every penny counts!
Working out which business deductions you can claim on your taxes is important for keeping more of your hard-earned dollars where they belong—in your pocket!
But let’s be real for a second: tax deductions are far from straightforward. And being self-employed seems to make things even more confusing.
One question we always get is, “Can I deduct gas from my taxes?” It’s a great question! After all, running a business often means a lot of time on the road.
From client meetings across town to industry conferences two states over, the trips (and their costs) add up fast. If it’s possible to claim these costs as a business expense, then you definitely don’t want to miss out.
Discover valuable tips and information to help you save as much as possible on your gas expenses in this guide!
Are gas expenses deductible?
Yes, the gas you purchase for travel to business-related activities is absolutely tax-deductible. This means big savings on your fuel costs—yay!
But wait—don’t dash off just yet! There are still some important things you need to know.
Like all things in life, there are rules around how these tax deductions work. It’s important to follow them so you make the most of the savings while staying compliant. Trust us, you don’t want to mess up on your taxes—hefty fines are no fun!
Key rules for deducting gas expenses
Ready to save on gas for your business? Here’s what you need to know to have everything in order.
Business miles only
When deducting gas as a business expense, make sure you’re only counting miles traveled for business activities. While it’d be a nice perk to save on personal gas costs—sighs—that’s just not how it works.
So, for personal miles—like grocery runs, trips to visit family, school drop offs, etc—the gas costs will need to come out of your own pocket. And yes, this still applies even if you’re driving those personal miles in a company car.
What trips are considered business mileage?
There are specific trips the IRS counts as business-related. These include driving:
- Between two different workplaces
- From your home to a temporary workplace
- To meet with clients
- For any other business-related errands
Proof of every trip
Unfortunately, the IRS won’t just take your word about how many of the miles you traveled were business purposes. You’re going to need some proof!
To qualify for fuel deductions, you’ll need to share accurate records of each business trip—information like dates, locations, mileage, and the purpose of the trip.
This sounds boring and time-consuming (because it is!), but there are ways to make the process a lot smoother. For example, mileage apps are a great way to save you time while giving you a solid backup if the IRS ever comes knocking.
How to deduct gas as a business expense
You have two options for deducting gas as a business expense. Which one you pick is entirely up to you and what works best for your situation.
1. The Standard Mileage Rate Method
Your first option for deducting gas prices as a business expense is to use the Standard Mileage Rate. This method uses a set deduction rate for every mile you travel. The IRS decides this rate every year. (FYI—it’s 67 cents per mile for 2024.)
All you have to do is keep an accurate log of all the business miles you traveled during the tax year. Jot down the date, destination, purpose of each trip, and miles driven. At tax time, multiply those business miles by 67 cents, and you have your deduction!
For example, if you drive 5,000 miles for the year, your deduction would be $3,350 (5,000 miles x $0.67).
2. The Actual Expenses Method
Claiming a gas deduction with the Actual Expense Method is a little different. For this one, you’ll need to keep track of all your car-related expenses for the year and add them up.
This method takes a bit more organization, but it often leads to a bigger tax break, because it’s tracking your actual vehicle expenses instead of following the standard rate!
You’ll need to track every car cost for the year—gas, oil changes, new tires, insurance, registration fees, business-related parking fees, and other car expenses.
When tracking these costs, make sure you’re logging your miles driven for business vs personal trips. For example, if your business miles make up 60% of your total driving, 60% of your yearly car expenses are deductible. The other 40% is not.
Still a little confused? Here’s a helpful breakdown:
Let’s say you spend $2,000 on your car in a tax year, and 60% of your driving was for business activities.
Your deductible amount would be $1,200 ($2,000 x 0.60). What’s left is non-deductible, because it can’t be considered a business expense.
Remember, both the Actual Expense Method and the Standard Mileage Rate have their pros and cons. It all comes down to your driving habits and how precise you want to be with your expense tracking.
Wrapping up!
As a business owner, you can deduct gas expenses on your tax return once the fuel is used for business travel. To claim gas deductions, you have two options—the Standard Mileage Rate or the Actual Expense Method. For more info, get your hands on Tax Savvy Jessica’s Digital Tax Planner with a built-in tax deduction guide which details these deductions and more.
While the Standard Mileage Method is simpler, the Actual Expense Method can often lead to higher tax deductions as it involves an exact figure for what you spent on auto expenses. Whatever route you choose is entirely up to you and your personal situation.
Deduct car expenses with Tax Savvy Jessica
Looking for someone to handle tax deductions on your behalf? Look no further than Tax Savvy Jessica.
With a TSJ strategy, you can relax knowing we’re on top of your business’s potential tax savings, including vehicle-related expenses, business rent, employee salaries, insurance, marketing, and much more.
We offer comprehensive tax strategy packages along with tax resolution and tax prep services. Our goal? To help small business owners like you keep more of their hard-earned money so you can build the life you deserve.
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