Gasoline Tax Deductions

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Fuel costs such as the cost of gasoline for vehicles are common expenses that workers and businesses face in the course of performing jobs and carrying on normal business activities. Fuel expenses you incur for your own personal use are generally not tax-deductible but the cost of purchasing gasoline is tax-deductible when you drive your car for business purposes.

Business Use of a Vehicle

The Internal Revenue Service states that the business use of a vehicle is a tax-deductible expense. If you use a car exclusively for business purposes, you may deduct the total cost of its operation on your tax return, including the cost of gasoline. If you use a car for both business and personal uses, you must divide expenses between business use and personal use. Commuting to and from your normal workplace is not a considered a business use. Business uses include commuting from one workplace to another, visiting clients and other driving tasks that are are required by your employer.

Cents-per-mile Method

When figuring the amount of your tax deduction for the business use of a vehicle, you may use one of two valuation methods: the cents-per-mile method or the actual value method. Under the cents-per-mile method, your deduction equals the total amount of miles you drove for business purposes times a standard mileage rate. The IRS says that the standard mileage rate is .51 for 2011.

Actual Value Method

Under the actual value method, the size of your deduction equals the actual cost of operating a vehicle for business purposes. This includes the cost of gasoline, oil, repairs, insurance, registration fees and licenses. If your car is not fuel-efficient, you will more likely to benefit by using the actual value method, since the cents-per-mile valuation method does not take into account the fuel efficiency of a vehicle.

Fuel Credit for Farmers

The IRS states that a tax credit is available for excise taxes paid on gasoline purchased for use on a farm for farm purposes or by a farmer for off-highway businesses. An excise tax is a tax imposed on specific goods; gasoline, cigarettes and alcohol are commonly subject to excise taxes.

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