Fuming Over Fuel Costs? The Tax Code Can Help

By Tom Ripley

We don't have to tell you how expensive fuel is. In many areas around the United States, gasoline now costs well over $3 a gallon, which has motorists thinking about how best to ease the pinch at the pump this summer. Amazingly, there might be help from an unexpected source. According to tax experts at H&R Block, there's relief in the tax code -- if you know where to look. Of course, the best advice is to limit fuel consumption, but for those who can't or won't restrict their driving this summer, not knowing what tax benefits are available is like burning money twice.

"Americans don't seem to be ready to curb our driving habits, but that doesn't mean we have to idle by and waste our paychecks," said Maggie Doedtman, H&R Block's advice delivery manager. "With gas prices through the roof, it pays to know what benefits are out there."

To begin with, some work-related costs are deductible if employers don't reimburse them. If a taxpayer is required to travel somewhere other than his or her primary place of employment, for example, those expenses can be claimed as itemized deductions. The commute to and from a second job (one taken to pay for gas, perhaps) can also be written-off, according to H&R Block.

With a little planning, even summer vacations can offer some tax relief. If taxpayers explore job opportunities as part of their itineraries, they can claim certain costs as they fit into other deductible categories. A computer engineer vacationing in Silicon Valley, Calif. for instance, can claim mileage to and from a high-tech job interview.

The vehicle-related costs that you as a taxpayer incur to move for a new job can also be deducted, depending on the distance between your new home and new job. So can miles driven for medical or charitable purposes. Documentation is required whenever a taxpayer is claiming a mileage deduction, and keeping detailed records can prevent major headaches should the Internal Revenue Service have a question later.

"Travel costs can add up fast, especially with the price of gas increasing," Doedtman said. "Claiming mileage deductions makes sense, but keeping track of your trips with a log is important so you can substantiate the benefits you'll receive."

Claiming mileage deductions isn't the only option, either. If the time's right for you to buy a new vehicle, taxpayers fed up with the high price of gasoline would do well to consider alternative-fuel vehicles. A dollar-for-dollar credit up to $3,000 is available for hybrid vehicles, depending on the make, model and number sold. Other tax credit amounts are available for other alternative-fuel vehicles.

Even getting rid of an old, low-fuel economy car could qualify taxpayers for a tax benefit. If a vehicle is donated to a charitable organization, the amount that the charity later sells the vehicle for (or the fair market value if the vehicle is kept and used by the organization instead) can be claimed as a charitable deduction.

More information about vehicle- and fuel consumption-related credits and deductions is available at H&R Block. In addition, taxpayers can visit an H&R Block office for a consultation.

Driving Today Contributing Editor Tom Ripley writes about the auto industry and the human condition -- including death and taxes -- from his home in Villeperce, France.