Can You Depreciate a Vehicle and Take Mileage?

You cannot depreciate a vehicle and take mileage on the same car in the same tax year. The IRS treats the standard mileage rate and the actual expense method as two separate tracks, and you have to pick one. The reason is built into the mileage rate itself: a depreciation allowance is already baked into the per-mile figure (35 cents of the 72.5-cent 2026 rate), so claiming a separate depreciation deduction on top would let you write off the same wear and tear twice.¹²

If the IRS finds both methods claimed on the same vehicle during an examination, it can disallow the entire vehicle deduction and add an accuracy-related penalty of 20% of the resulting underpayment, rising to 40% for a gross valuation misstatement.³

What the Standard Mileage Rate Already Covers

The 2026 business standard mileage rate is 72.5 cents per mile. That single number is meant to stand in for the fixed and variable costs of operating a car, van, pickup, or panel truck, and it applies the same way to gasoline, diesel, hybrid, and fully electric vehicles.⁴ Once you choose it, you cannot separately deduct:

Fuel, including electricity for charging an EV
Maintenance and repairs such as oil changes, tires, and brake work
Insurance premiums
Registration and license fees
Depreciation

Parking and tolls tied to a business trip sit outside the rate and stay deductible on top of it. Parking at your regular workplace does not qualify, because that’s commuting.¹

The Depreciation Built Into the Rate

For 2026, the IRS treats 35 cents of every business mile as depreciation.² That figure is why a separate depreciation write-off is off-limits when you use the rate, and it also matters later: your vehicle’s tax basis drops by that amount for every business mile you claim. Ten thousand business miles in 2026 reduces your basis by $3,500. A lower basis means a larger taxable gain when you eventually sell or trade the vehicle.

Depreciation as a Separate Deduction

When you go the other way and use the actual expense method, depreciation becomes its own line item. You tally the real costs of running the vehicle — fuel, insurance, repairs, registration — and calculate depreciation separately from the purchase price, then multiply the total by your business-use percentage. A car driven 70% for business yields 70% of eligible expenses and depreciation.⁵

Depreciation on a passenger vehicle runs through the Modified Accelerated Cost Recovery System over a five-year period, with Section 179 expensing and bonus depreciation available to front-load the deduction. Passenger cars are subject to annual dollar caps under Section 280F, which override the normal MACRS percentages. Bonus depreciation, which had been phasing down, was restored to 100% for qualifying property acquired after January 19, 2025.⁶ Section 179 and bonus depreciation both require more than 50% business use during the year. If business use later drops to 50% or below, part of those accelerated deductions is recaptured as ordinary income.⁷

Two boundaries are worth flagging. If you operate five or more vehicles at the same time, that’s a fleet, and the standard mileage rate is not available at all; the actual expense method is the only option.¹ Leased vehicles follow their own rules discussed below.

The First-Year Choice Locks In More Than You’d Think

The method you pick the first year a vehicle is available for business sets the rules for every year that follows. To use the standard mileage rate on a vehicle you own, you have to elect it in that first year. Start with the mileage rate and you keep the option to switch to actual expenses later, and to move between the two in subsequent years.⁸

Go the other direction and the door closes. If you use actual expenses in year one and claim Section 179, bonus depreciation, or any MACRS method other than straight-line, you cannot ever use the standard mileage rate on that vehicle. You stay on actual expenses for as long as you use it in the business.⁸

There’s also a quieter restriction on the other switch. If you start with the mileage rate and later move to actual expenses, you cannot use the accelerated MACRS tables to depreciate the vehicle from that point forward. You must depreciate it using straight-line over its estimated remaining useful life.⁸

Leased Vehicles

The switching rule tightens for a lease. Choose the standard mileage rate on a leased car and you have to stick with it for the entire lease, including any renewals. You cannot flip to actual expenses partway through.¹ Use actual expenses on a lease instead, and the business portion of your lease payments becomes deductible along with the other operating costs — but for higher-value cars the IRS makes you add a “lease inclusion amount” back to income each year, mirroring the effect of the Section 280F caps for owners.⁹

What Happens When You Sell the Vehicle

Whichever method you used, depreciation follows you to the sale. Your adjusted basis is reduced by the depreciation attributable to business use, and that reduction determines your gain or loss when the vehicle leaves the business.

If you used the standard mileage rate, the reduction is the depreciation portion of the rate multiplied by your business miles for each year — 35 cents per mile for 2026, 33 cents for 2025, 30 cents for 2024.² If you used actual expenses, your basis drops by the depreciation you claimed, or that you were allowed to claim even if you forgot to take it.

Sell above the reduced basis and the gain that matches the depreciation you took is taxed as ordinary income under Section 1245, not at capital gains rates. This is depreciation recapture. Any gain beyond the depreciation amount is a Section 1231 gain that may qualify for capital gains treatment if you held the vehicle more than a year.¹⁰ The sale is reported on Form 4797.¹¹

Records That Back Up Either Method

Either method requires a mileage log showing the date, destination, business purpose, and miles for each trip. That log is what proves your business-use percentage, and without a contemporaneous one — kept at or near the time of each trip — the IRS can disallow the vehicle deduction outright.⁸ GPS-based apps are accepted as long as they capture the same information.

On actual expenses, add receipts for fuel, repairs, insurance, and every other operating cost. Tax records are generally retained for three years from the filing date, but depreciation records should be kept until the limitations period runs on the year you dispose of the vehicle, since those records are what let you calculate gain or loss at sale.¹²

1
Internal Revenue Service. Topic No. 510, Business Use of Car
2
Internal Revenue Service. Notice 2026-10 – 2026 Standard Mileage Rates
3
Internal Revenue Service. Accuracy-Related Penalty
4
Internal Revenue Service. IRS Sets 2026 Business Standard Mileage Rate at 72.5 Cents Per Mile
5
Internal Revenue Service. Publication 946 (2024), How To Depreciate Property
6
Internal Revenue Service. Treasury, IRS Issue Guidance on the Additional First Year Depreciation Deduction Amended as Part of the One, Big, Beautiful Bill
7
Internal Revenue Service. Instructions for Form 4562 – Depreciation and Amortization
8
Internal Revenue Service. Publication 463 (2024), Travel, Gift, and Car Expenses
9
Internal Revenue Service. Revenue Procedure 2024-13
10
Internal Revenue Service. Publication 544 (2025), Sales and Other Dispositions of Assets
11
Internal Revenue Service. Instructions for Form 4797
12
Internal Revenue Service. How Long Should I Keep Records