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Your Guide to Deducting Mileage versus Gas Receipts

Deducting mileage vs gas receipts

If you use your vehicle for business purposes you can either deduct the actual cost (gas receipts) or you can deduct the miles. The IRS does not allow you to do both, using both methods could result in an audit. In both cases you will need to figure out the percentage of use for business versus personal use.

Actual Expenses

If you are using the actual expense method, you can deduct all vehicle operating expense. This includes all gas receipts as well as maintenance expenses. These expenses can include routine oil changes, tires, registration, insurance, repairs or tire rotations.  Lease payments, or vehicle depreciation if you own can also be included. The total must be calculated using the percent of time the vehicle is used for business.

Deducting Mileage

In this instance a log would be kept of the mileage used for business and multiplied by the deduction rate published by the IRS; currently this rate is 57.5 for 2015. This rate often changes yearly. View the current Standard Mileage Rate as set by the Internal Revenue Service.

Deducting Mileage versus Gas Receipts; Which Option to Choose?

In order to analyze which method is best, begin by keeping all gasoline and maintenance receipts, as well as, a log of the miles driven for business. Calculate the deductions both ways and determine which will save you more in taxes. In either method tolls or parking permits/fees can be included that relate to business.

Our recommendation is to start by tracking both options and after a year, you well have a good basis for determining the best option for your specific needs.

When not to use standard mileage if you:

  • Use five or more cars at the same time (as in fleet operations),
  • Claimed a depreciation deduction for the car using any method other than straight line, for example, MACRS,
  • Claimed a Section 179 deduction on the car,
  • Claimed the special depreciation allowance on the car,
  • Claimed actual car expenses after 1997 for a car you leased, or
  • Are a rural mail carrier who received a qualified reimbursement.

Tracking Mileage Made Easy

Vehicle expense tracking is very easy to do, it just requires you to take time to add the miles. We have prepared an easy excel sheet for tracking mileage and expenses for business mileage deductions. Save this to your computer or to a shared folder that is accessible from all of your devices so that you can stay on top of your miles tracking.

Miles Tracking Spreadsheet

Expert Small Business Tax Professional

Our team of tax experts are ready to serve you and your business to ensure that you are able to secure the maximum deductions while maintaining proper IRS compliance. We are ready to serve you in both Detroit Lakes, MN and Fargo, ND. Contact us today at 218.847.5225