Can I Claim Fuel or Mileage on My Taxes?
For most taxpayers, the IRS treats your car expenses, such as fuel, as a personal nondeductible expense. However, if you use your personal car as part of your employment duties or use it in a business you operate, the IRS will allow you to claim a deduction for either your fuel costs or mileage.
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Deducting Car Expenses
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The IRS provides a narrow exception in which you can deduct your car expenses. As an employee, you are not permitted to deduct the fuel or mileage costs you incur when commuting to your job, irrespective of how long the drive is. However, you can deduct the expenses you incur if your boss requires you to use your car to make deliveries or to carry out some other business task. If you are self-employed, you are also allowed a deduction for fuel or mileage, but only for the times you use the car for the business. If you split the use of the car between personal and business, you must allocate your expenses between deductible business and nondeductible personal.
Actual Fuel Costs
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Regardless of whether you are an employee or business owner, you can always claim a deduction for your actual expenses that solely relate to work. Commonly, this includes the fuel and oil consumed when using the car for work or business. You can also deduct other expenses you incur such as car insurance, registration fees and some repairs. If you only use the car 25 percent of the time for work or business, however, then you can only claim a deduction equal to 25 percent of these costs.
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Standard Mileage Rate
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As an alternative to deducting actual fuel and other costs, the IRS provides a standard mileage rate each year. Calculating the deduction with the mileage rate is simpler than accounting for all of your actual costs. To arrive at your total deduction, you simply multiply the rate by the number of miles you drive during the year for work and business purposes. If you choose to calculate your deduction using the standard mileage rate, then you cannot claim any additional deduction for your insurance, registration fees or repairs. The purpose of the rate is to estimate a portion of these costs per mile.
Reporting Car Deductions
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Any year you claim a deduction for car fuel or mileage, you must report the expenses with your itemized deductions. If you claim a standard deduction, then you cannot deduct any car expense. Generally, you will save more in tax by itemizing when the total of all your expenses, including the mileage or fuel, exceed the standard deduction amount. If you satisfy these criteria, then in addition to Schedule A, you must also report your car expenses on Form 2106 and attach it to your tax return.
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