If you’re a rideshare or delivery driver, gas will be one of your biggest expenses. It’s also going to be one of your biggest tax deductions. In order to claim this deduction, you need to understand how delivery drivers can write off gas.
What’s the general rule on business expenses?
The general rule on tax write offs is that you can deduct ordinary and necessary business expenses. Since your car can’t go without gas, it’s pretty obvious that using gas is necessary for delivery gigs. It’s also pretty ordinary for an independent contractor doing deliveries to claim this expense.
If you’re a skeptic or contrarian, you might be wondering about electric cars. It’s true that you can use an electric car and never have to buy gas. But you still have to pay to make your car go. So whatever type of fuel you use is an ordinary and necessary expense.
How can you write off gas as a delivery driver?
There are two ways you can deduct gas. You can either use the standard mileage rate or the actual car expenses method.
What is the standard mileage allowance?
The standard mileage deduction lets you deduct a fixed amount per mile. The standard mileage rate includes your gas and other car expenses.
Here are the current standard mileage rates.
- 2023: 65.5 cents per mile
- 2022 July through December: 62.5 cents per mile
- 2022 January through June: 58.5 cents per mile
- 2021: 56 cents per mile
With the standard mileage deduction, you don’t write your gas expenses off directly. You also don’t need to keep gas receipts. You just keep a mileage log and deduct a flat rate for all of your business miles.
Remember, mileage deductions are in place of gas deductions. If you deduct business mileage, you can’t also deduct your gas.
How do you deduct mileage when the standard mileage rate changes in the middle of the year?
When there are large increases in gas prices, it’s common for the IRS to announce an increase in the standard mileage rate during the current year.
The increase usually only applies to part of the year. You don’t get to go back and use the higher rate from the start of the year.
Normally, your tax filing software asks you for your total business miles during the year. When there are multiple mileage rates in a year, you’ll have to report your mileage for each part of the year.
For example, in 2022, the IRS said that the original standard mileage rate would apply through June, and a higher rate would apply from July through the end of the year. You’ll need to know the miles you drove in January through June and the miles you drove in July through December.
If you use a mileage tracking app, you can usually run a report that shows you your mileage for a given date range. Many apps will even automatically give you a summary of your miles under each rate along with your projected deduction.
What is the actual expense method?
If you use the actual expense method, you do need to keep track of your gas costs and all of your other vehicle expenses. You include all of your expenses on your tax return and deduct exactly what you paid.
One thing to keep in mind is that you can only deduct the gas that you used during deliveries. You can’t deduct the cost of filling up your tank if you were also driving your car for personal reasons.
One way you can keep track of your gas expenses is by filling up your tank at the start of your workday and filling it up again when you’re done. The cost of filling up at the end of the day is your gas business expense for the day. Keep both receipts, so the IRS knows the second receipt only covers business gas.
Another way you can keep track is to track your total gas expenses then divide by business and personal miles. For example, if you spent $100 in a week on gas and 90% of your miles were for business, you can deduct $90. You’ll still need to keep all of your receipts to support your expenses.
What if you have a motorcycle or motorized bike?
If you make deliveries using a motorcycle or motorized bike, the rules are a little different. You can claim your expenses, but you can’t use the standard mileage deduction.
The standard mileage deduction is for cars, trucks, SUVs, minivans, and similar personal vehicles. Those types of vehicles have different and higher expenses than motorcycles or bikes.
If you deliver on two wheels, you’ll have to track and claim your actual expenses. That works the same was as tracking your actual expenses for a car.
Do gig economy delivery apps pay for gas?
Services like GrubHub, DoorDash, Postmates, Amazon Flex, Delivery Logistics, and Uber Eats don’t usually pay for gas. Even if they paid for gas, you’d need to treat those payments as income. You would then write off what you spent on gas using one of the above methods.
Can a gig economy driver deduct other car expenses?
Gas will probably be your largest expense item as a food delivery driver, but you can still deduct other car expenses. Common deductions include repairs, insurance, and maintenance.
If you use the standard rate, you can’t deduct these expenses separately because they’ll be included in your standard mileage deduction. If you use the actual expenses method, you’ll need to figure out what percentage is for business, just like you have to do with gas.
Do you get any tax forms for gas?
There are no separate tax forms for gas. If you’re writing off gas expenses, follow the instructions to take the standard mileage deduction or actual expenses method on your Schedule C. If you do receive a gas reimbursement, include it as business income.
To support your Schedule C, keep your mileage log, gas receipts, and other receipts in your records for a minimum of three years. Three years is the usual amount of time for an IRS mileage log audit, but there are limited circumstances where they can look back even further.
Can employee delivery drivers write off gas?
If you’re an employee delivery driver, the rules are a little different. Employees aren’t allowed to deduct business expenses. Your taxable income is what you receive on your paycheck.
Unlike self-employed workers, you don’t have to pay taxes on gas reimbursements your employer pays you if they follow the IRS rules. They can either use the IRS mileage rate, or they can ask you to submit receipts.
When your employer reimburses you for gas, they need to identify the money as a gas reimbursement. They also need to make sure it doesn’t get marked as taxable wages on your W-2.
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