Your Taxes: Writing Off Gas Expenses And More
This story has been updated to reflect the 2013 tax year.
Tax day is coming up on April 15, so take some time to start prepping. If you need some inspiration, remember to read all our tax tips. Kathy Pickering, executive director of The Tax Institute at H&R Block, tackles your tax concerns.
My husband is using the GI bill to go to college, and I was wondering if it can be combined with these student tax benefits.
Kathy Pickering: Benefits from the GI bill used to pay for qualifying education expenses are excludable from income. Another education tax benefit cannot be claimed for the same expenses. However, you can claim a credit (or other education tax benefit) for any education expenses not paid for by the GI bill. For example, say your husband has $10,000 in tuition expenses, and he receives tax-free GI benefits of $3,000 to pay for the tuition. If you qualify, you may use an education tax credit or deduction for the remaining $7,000. Note that the different tax credits and deductions each have their own limits as to how much qualifying education expense they can cover. See IRS Pub. 970, Tax Benefits for Education (Veterans’ Benefits).
When claiming mileage for your car, can you also write off gas expenses?
KP: The short answer is “no.” The reason is that the cost of gas is already included in the standard mileage rate that the IRS allows taxpayers to use, instead of keeping track of all deductible vehicle expenses. In fact, there are two methods for deducting vehicle expenses: the standard mileage method and the actual cost method. However, for business trips, you can deduct the cost of parking and tolls, regardless of which method you use.
Finally, note that if you use the standard mileage method, each of these functions has its own “standard” rate. For example, for business the 2013 rate is 56.5 cents per mile, but for charitable use the rate is only 14 cents per mile (and 23.5 cents for both medical transportation and for moving/driving to a different city). There are also certain rules to qualify using the standard rate for business purposes. You can read more about this in IRS Pub 463, Travel, Entertainment, Gift, and Car Expenses.
What exactly do you need to write off your mileage? Just a personal record or your mileage use? Gas receipts?
KP: If you are using the standard mileage method, which already includes a component for gas, you do not need to save gas receipts. However, you will need to record the mileage in a log for every trip that is taken for which a deduction is to be taken. For example, if you use your vehicle for business, your log should show the date of the trip, the number of miles (or the beginning/ending odometer reading), the purpose of the trip, points driven from and to, etc.
If you are using the actual cost method, then your gas receipts do become the “source document” to support a deduction. How you report the deduction depends on whether you are an employee or an independent contractor or business owner. If you are reimbursed partially or wholly for use of your vehicle, the rules for reporting the expense and reimbursement can get rather complicated. Again, see IRS Pub 463 for more information.
Can you have enough write-offs that you don’t pay any income taxes at all (I’m an independent contractor who drives a lot for work)?
KP: If your deductible business expenses are so great that they create a loss on your “Schedule C” (used by independent contractors to report income and expenses), you could create a net operating loss that offsets any tax liability.
However, keep in mind that there are many items that go into a “typical” tax return, and they are all aggregated to calculate your tax liability. So, you may have a loss on your contracting work but still have other income from other sources (such as dividends, capital gains, etc.) that still creates a tax liability.