How to Write Off a Fuel Allowance
- 1). Gather records that document your employee travel for the year. The best way to keep records is with a mileage log. You can also use company dispatch records or any other documents that can verify your travel.
- 2). Calculate the number of miles you drove on company business during the year. Do not include the miles you drove to and from work, unless you drove out of town to a temporary work assignment and spent at least one night there.
- 3). Go to Part II of IRS Form 2106, "Employee Business Expenses." Put the number of business miles on Line 13, and answer the other questions in Section A about your vehicle.
- 4). Calculate your mileage deduction by multiplying the number of business miles by the current standard mileage rate. For example, if you drove 8,000 business miles in 2011, your mileage deduction would be $4,000.
- 5). Calculate your actual work-related vehicle expenses if you think it will be higher than the mileage deduction. Actual expenses include things such as gas, oil, repairs, maintenance, vehicle insurance, vehicle interest payments and depreciation. Calculate the expenses using Sections C and D of Form 2106.
- 6). Compare your actual expenses to the standard mileage deduction. Write the higher amount on Line 22.
- 7). Go back to Part I of the form and enter the amount from Line 22 on Line 1.
- 8). Enter any other employee business expenses on Lines 2-5. These expenses can include parking fees, tolls, cab fares, the costs of traveling and staying out of town, business meals and entertaining costs, professional dues, professional journals, work clothing, tools, job training costs and anything else that you had to pay for out of your own pocket in order to perform your job.
- 9). Follow the directions on the rest of the form to get the total amount of your employee business expenses on Line 10.
Enter the amount from Line 10 of Form 2106 on Line 21 of IRS Schedule A (Form 1040,) "Itemized Deductions."
Fill out the rest of Schedule A to find the total amount of your itemized deductions. You will need to include expenses such as state income or sales taxes, mortgage interest payments, property tax payments, charitable contributions and medical expenses to find the total amount, which will be on Line 29.
Compare the total of your itemized deductions against your standard deduction to see which is higher. If your itemized deductions are higher than your standard deduction, write the amount on Line 40 of Form 1040. The standard deduction amounts for 2011 were $5,700 for a single person, $8,400 for head of household, and $11,400 for a married couple. These amounts could change in future years. If the total of your itemized deductions is lower than your standard deduction, then you should take the standard deduction and there is no reason to file the Form 2106 or Schedule A.