Gas deductions provide relief

One way businesses can mitigate the impacts of high gas prices is to make sure they do all the right things to take the maximum allowable deductions on their 2005 tax returns.

According to the Internal Revenue Code, if you use your automobile for business or employment purposes, you ordinarily can deduct car expenses. This includes upkeep and repair as well as the gas for operation of your business or employment. So, start keeping better track of expenses. Some examples that qualify include getting from one workplace to another when you have more than one regular place of business; visiting clients or customers; travel and entertainment; and going to a business meeting away from the regular workplace.

There generally are two methods to figure deductible expenses: standard mileage rate (for 2005, the Internal Revenue Service set this at 40.5 cents per mile); and actual car expenses (such as gas and oil, cleaning, waxing, insurance, depreciation, repairs, and maintenance). This year, due to the price of gasoline, actual car expenses may be far more than the standard mileage rate. Calculate each and compare which is most advantageous. Regardless of which deductible you use, make sure you keep an accurate log of all travel activities, costs, and expenses.

Create a written travel log of your business related travel. Purchase gas and pay for repairs with a check or credit card that allows you to create a valid and reproducible document trail so you are able to describe and substantiate the legitimate purposes for your travel. Save all receipts.

Itemize the expenses and deductions on your tax forms properly. This year, the gas alone may be many times what you achieved in previous years.

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