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Can Self-Employed Individuals Deduct Gas And Vehicle Services?

Your vehicle is more than just a set of wheels. It’s a tool for your trade when you’re self-employed. You might use it to meet clients, travel to conferences or attend a networking event. Many of the costs you incur for gas and vehicle services can often be your golden ticket to take deductions. Vehicle-related deductions are a valuable aspect of tax planning, providing an opportunity to reduce your overall tax liability. These deductions cover a wide range of expenses associated with using a vehicle for business, medical, charitable or moving purposes. In this guide, we’ll discuss how you can turn your business rides into tax savings and how to navigate the world of gas and vehicle service deductions. We’ll also answer questions like can you deduct gas on taxes, can you write off your car and can you write off car repairs.

Table of contents

Key takeaways...Read more

What are vehicle-related deductions?...Read more

Mileage...Read more

Parking and Tolls...Read more

Leasing and Interest...Read more

Are car repairs tax deductible?...Read more

Tax-deductible business miles...Read more

So, can you claim gas on taxes?...Read more

Commuting vs. business miles...Read more

Moving...Read more

Charitable Use...Read more

Is car insurance tax deductible? ...Read more

Key takeaways

Vehicle-related expenses are tax-deductible for self-employed individuals
There are two methods for deducting vehicle expenses: the standard and actual expense
Commuting miles aren’t tax-deductible, but business-related miles are deductible

Mileage

The standard mileage rate, set by the IRS, is a simplified method for calculating deductions. It considers the cost of gas, wear and tear and insurance. Alternatively, you can choose to deduct your vehicle costs with the actual expenses method. To determine which method is better for you, consider factors such as your total mileage, vehicle depreciation and repair costs.

Parking and Tolls

While traveling for work, expenses like parking fees and tolls can quickly add up. These are considered legitimate deductions and should be tracked and documented. If you need to pay for parking at a conference, you can deduct those costs. Any tolls you traveled through on your way to and from the conference are also deductible.

Leasing and Interest

If you lease a vehicle for business use or have an auto loan with interest payments, you can often deduct a portion of these costs. Just be sure to keep records of your payments.

Are car repairs tax deductible?

Car repairs can be tax-deductible in specific circumstances, primarily when they are related to business or work-related use of the vehicle. If you use your vehicle for business purposes, such as deliveries, client visits or any work-related travel, you can often deduct the costs of repairs and maintenance as part of your business expenses. This includes expenses like fixing the engine, brakes or other components necessary for the vehicle to perform its job.

Infographic entitled Tax-Deductible Car Repairs listing the items eligible for the car repair vehicle tax deduction.

Tax-deductible business miles

You might be wondering how to write off mileage on taxes. If you want to write off car mileage, you first need to figure out the amount of miles you drove during the tax year. Let’s say you drove 12,000. The next step is to figure out how many miles were for business. You estimate that 6,000 miles were business-related, making your business-use percentage 50%. Now, you’re eligible to write off 50% of your car expenses. Say you're a photographer and need to travel to different locations for client shoots. The miles you drive to and from the shoot were for business. If you decide to stop on the way home and get Chinese takeout because you're craving wonton soup, the miles on the way home aren’t covered under the gas tax deduction. The pitstop on the way home wasn’t for business. Now, if you stopped on the way home to pick up a new camera or camera equipment, this errand is business-related, and the miles are eligible for the gas tax deduction.

So, can you claim gas on taxes?

One way to claim a gas tax credit is by taking the standard mileage rate. This standard rate set by the IRS gives you a 1099 tax deduction based on the number of work miles you drive during the tax year. To calculate your deduction using the standard mileage rate, follow these steps:

Figure out your mileage: Keep a detailed mileage log that includes the date, purpose of the trip, starting and ending mileage and total miles driven for each deductible category (business, medical, moving, or charitable).
Identify the applicable rate: Check the current standard mileage rate set by the IRS. This rate can change annually, so it's important to use the rate for the tax year in which you're calculating deductions. The current rate for 2024 is $0.67 per mile.

The previous rate covered the second half of 2022, from July to December at 62.5 cents per mile. The rate for the first half of 2022, January to June, was 58.5. The IRS announced a standard mileage rate rise halfway through the year due to rising inflation and high fuel prices.

Multiply miles by the rate: Multiply the total number of deductible miles in each category by the corresponding standard mileage rate.

For example, if you drove 5,000 miles for business purposes and the standard mileage rate for business use is $0.65.5 per mile, your deductible business mileage expenses would be 5,000 miles x $0.62.5 = $3,275.

Keep records: Maintain accurate records as proof in case of an audit. This includes your mileage log, receipts for related expenses (such as parking and tolls) and documentation of the purpose of each trip.
Report deductions: When you file your tax return, report your mileage deductions in the appropriate section, which can vary depending on the tax form you're using ( Schedule C for business deductions, Schedule A for medical and moving expenses or directly on Form 1040 for charitable deductions)

Remember that using the standard mileage rate is optional; you can choose to calculate your actual vehicle-related expenses instead. The standard mileage rate provides a simplified method for many taxpayers and often results in significant tax savings.

Infographic entitled 2022 vs. 2023 Standard Mileage Rates listing the rates for the standard mileage deduction.

If you choose the standard mileage option, you won’t be able to write off every car-related expense as you can with the actual expense method. Wondering if you can take the gas tax deduction with this method? Unfortunately, you can't, but you can write off registration, parking fees, and toll expenses.

Commuting vs. business miles

Commuting and business miles may seem similar, but they have distinct purposes and tax implications. Commuting miles refers to the distance you travel from your home to your regular place of work and back. These are the everyday trips you make to get to your job, whether you work in an office, a factory or any other fixed location. Commuting miles are considered personal and are typically not tax-deductible. The IRS does not allow deductions for the expenses incurred during your regular commute. Business miles, on the other hand, are the miles you drive for work-related purposes beyond your daily commute. These can include trips to meet clients, travel to job sites, attend business meetings or any other travel directly related to your job or business. Business miles are considered legitimate deductions and can significantly reduce your tax liability. You can calculate these self-employment deductions using the standard mileage rate set by the IRS or by tracking your actual expenses, such as gas, maintenance and repairs. Although you can't claim deductions for your regular commute to work, you can make the most of business miles to maximize your tax savings. FlyFin is there for you to help you keep track of your business vs. commuting miles and all your tax-deductible vehicle expenses. A.I. helps you find and track every possible deduction, while CPAs offer unlimited support. They can even help you file a completely accurate tax return and pay quarterly taxes.

Moving

You can deduct your moving expenses if you move due to a job change and meet certain distance and time requirements. If you’re a military member, for example, your moving costs would be tax deductible.

Charitable Use

If you use your vehicle for charitable purposes, such as volunteering for a nonprofit organization, you can deduct the mileage driven to pick up or deliver supplies.

Is car insurance tax deductible?

In most cases, car insurance is not tax-deductible for personal use of a vehicle. Personal car insurance premiums are considered a private expense and are not eligible for deductions on your federal income tax return. There are some exceptions to this. If you use your vehicle for business purposes, you can typically deduct the portion of your car insurance that corresponds to business use. To do this, you’ll need to keep detailed records of your business-related mileage and expenses. While this doesn't directly relate to car insurance, if you're self-employed and pay for health insurance for yourself, your spouse, and your dependents, you may be eligible for a self-employed health insurance deduction. This can include health insurance premiums, which could indirectly free up funds for other expenses, including car insurance. Some states offer deductions or credits for car insurance premiums. These state-specific tax benefits can vary, so it's essential to check your state's tax regulations to determine if any deductions are available. Popular car insurance for car repair includes:

Geico
All State
Erie
Nationwide
Liberty Mutual
State Farm
Progressive
Farmers

Being a freelancer comes with flexibility, but it also means taking charge of your finances. Deducting gas and vehicle service expenses can be a key part of your tax strategy, so take advantage of the ride. Vehicle-related deductions can lead to significant tax savings for self-employed individuals and businesses. You can maximize your tax benefits by understanding the types of expenses that qualify for deductions.

Phone Tax Deduction

Cell phones can be a business tax deduction for self-employed individuals if it is an ordinary and necessary expense. A separate business cell phone can be fully written off.