The car and truck expenses worksheet on Schedule C asks you to do one of two calculations: multiply your business miles by the IRS standard mileage rate (72.5 cents per mile for 2026) and add tolls and parking, or total every actual cost of operating the vehicle and deduct the business-use percentage.1Internal Revenue Service. Standard Mileage Rates and Maximum Automobile Fair Market Values Updated for 2026 The result goes on Line 9, and Part IV of Schedule C captures the vehicle information behind it.
The Two Methods You Choose Between
Standard mileage is the shorter path. Track your business miles for the year, multiply by 0.725, and add any tolls and parking you paid on business trips. The rate covers gas, oil, insurance, registration, repairs, and depreciation, so none of those get deducted separately.
Actual expenses take more work. You add up every cost of operating the vehicle during the year, then multiply by the share of miles that were for business. Deductible costs include gas, oil, repairs, tires, insurance, registration, license plates, depreciation, lease payments, garage rent, tolls, and parking.2Internal Revenue Service. Publication 463 – Travel, Gift, and Car Expenses Expensive vehicles and heavy operating costs usually produce a bigger deduction this way.
The first-year choice matters. If you want the option to use the standard rate later, you have to pick it in the first year the vehicle is used for business. After that first year, you can switch between methods annually. Start with actual expenses and you’re generally locked out of the standard rate for that vehicle from then on.
When the Standard Mileage Rate Is Off the Table
The IRS blocks the standard mileage rate in several situations. You cannot use it if you:
- Operate five or more vehicles at the same time (fleet operations)
- Previously claimed accelerated depreciation or used MACRS on the vehicle
- Took a Section 179 deduction on the vehicle
- Claimed the special depreciation allowance (bonus depreciation) on the vehicle
- Claimed actual expenses after 1997 for a leased vehicle
Leases carry an extra constraint. Once you choose the standard mileage rate on a leased vehicle, you must stick with it for the entire lease, including renewals.3Internal Revenue Service. Topic No. 510, Business Use of Car Taxpayers who took a big first-year write-off through bonus depreciation or Section 179 often discover only later that they’ve permanently forfeited the simpler method for that vehicle.
Filling In Line 9 and Part IV
Sole proprietors put the deduction on Line 9 of Schedule C. If you use the standard mileage rate, complete Part IV of Schedule C with your vehicle information: total miles, business miles, commuting miles, and whether you have written evidence. If you’re claiming depreciation on the vehicle, skip Part IV and complete Part V of Form 4562 instead.4Internal Revenue Service. Instructions for Schedule C (Form 1040)
The standard mileage math is direct. Multiply business miles by 0.725 for 2026, add business-related tolls and parking, enter the total on Line 9. A vehicle driven 12,000 business miles produces an $8,700 deduction before tolls and parking. Gas, insurance, and depreciation are not deducted separately.
For actual expenses, start with your business-use percentage: business miles divided by total miles. Drive 15,000 total miles with 10,000 for business and your percentage is 66.7 percent. Multiply that percentage by your total operating costs (excluding depreciation) and enter the result on Line 9. Depreciation goes on Line 13. Lease payments go on Line 20a.
Part IV also asks whether the vehicle was available for personal use outside working hours, whether you have written evidence to support your mileage, and whether that evidence is a mileage log or similar record. Answering “no” on the evidence questions invites scrutiny.
Records You Need to Support the Entries
Federal law requires adequate records or sufficient evidence before you can claim a vehicle deduction.5Office of the Law Revision Counsel. 26 U.S. Code 274 – Disallowance of Certain Entertainment, Etc., Expenses At minimum, you need three mileage totals for the year: business, commuting, and other personal. Commuting between home and a regular workplace is never deductible.
The mileage log has to be contemporaneous. A log updated weekly counts as timely; a log reconstructed from memory at tax time does not. Each entry should show the date, destination, business purpose, and starting and ending odometer readings.2Internal Revenue Service. Publication 463 – Travel, Gift, and Car Expenses
If you go with actual expenses, keep receipts or records for every operating cost during the year: fuel, repairs, insurance, registration, and any lease payments. You’ll also need the date the vehicle was first placed in service for business and documentation of whether you own or lease, because those affect depreciation and lease-inclusion figures.
Depreciation Entries When You Own the Vehicle
Under the actual expense method, depreciation is usually the biggest single number in your calculation. Section 280F caps how much you can claim each year on a passenger automobile, regardless of what the vehicle cost.6Office of the Law Revision Counsel. 26 U.S. Code 280F – Limitation on Depreciation for Luxury Automobiles For vehicles placed in service in 2026, the annual limits are:
- With bonus depreciation: $20,300 (year 1), $19,800 (year 2), $11,900 (year 3), $7,160 each year after
- Without bonus depreciation: $12,300 (year 1), $19,800 (year 2), $11,900 (year 3), $7,160 each year after
The limits apply to the business-use portion.7Internal Revenue Service. Rev. Proc. 2026-15 – Depreciation Limitations for Passenger Automobiles The $8,000 gap in year one reflects the bonus depreciation add-on under Section 168(k). For 2026, bonus depreciation is 100 percent for property acquired after January 19, 2025.8Internal Revenue Service. Notice 2026-11 – Interim Guidance on Additional First Year Depreciation Deduction
Section 179 lets you expense a qualifying vehicle’s full purchase price in the year it’s placed in service, up to the overall Section 179 limit of $2,500,000 for 2025 (the 2026 figure may adjust slightly for inflation). Passenger automobiles still face the 280F caps above. The election pays off most on heavier vehicles: trucks and vans with a gross vehicle weight rating over 6,000 pounds but no more than 14,000 pounds can be expensed up to $31,300 under a special SUV cap.9Internal Revenue Service. Instructions for Form 4562 Vehicles over 14,000 pounds are not subject to the SUV cap and can be fully expensed up to the overall limit.
Business use above 50 percent is a threshold requirement for Section 179 and bonus depreciation. If business use drops to 50 percent or below in a later year, you have to recapture the excess depreciation previously claimed by adding it back to income.
Lease Payments and the Inclusion Amount
Lease a vehicle for business and you deduct the business percentage of your lease payments as an actual expense. But if the vehicle’s fair market value at the start of the lease exceeds an IRS threshold, you must reduce that deduction by adding an “inclusion amount” to your income each year of the lease. The rule keeps lessees from sidestepping the depreciation caps that apply to owners.
The specific dollar figures for leases beginning in 2026 are in Table 3 of Rev. Proc. 2026-15, keyed to fair market value and lease year.10Internal Revenue Service. Rev. Proc. 2026-15 – Lease Inclusion Amounts for Passenger Automobiles Amounts are small early and grow over the lease term. Ignoring them is a common audit adjustment.
What Happens If Your Records Don’t Hold Up
Vehicle deductions are among the most frequently audited items on Schedule C. Without a contemporaneous log showing dates, destinations, business purposes, and odometer readings, the IRS can disallow the deduction entirely.
On top of losing the deduction, you can face a 20 percent accuracy-related penalty on the underpaid tax if the IRS finds negligence or disregard of the rules. Negligence includes failing to make a reasonable attempt to comply or keep records. A substantial understatement (more than 10 percent of the tax due or $5,000, whichever is greater) carries the same 20 percent rate.11Internal Revenue Service. Accuracy-Related Penalty Interest runs on top until the balance is paid.
The IRS generally expects you to keep vehicle records for at least three years after filing.12Internal Revenue Service. How Long Should I Keep Records? The window stretches to six years if income was underreported by more than 25 percent. If you’re still depreciating a vehicle, keep the purchase documents for as long as it’s on your return.
Selling the Vehicle Later
Claiming depreciation lowers the vehicle’s tax basis, which is the figure the IRS uses to measure gain or loss when you dispose of it. Sell or trade in a business vehicle for more than its adjusted basis and the gain attributable to prior depreciation is taxed as ordinary income under Section 1245, not at the capital gains rate.13Internal Revenue Service. Publication 544 – Sales and Other Dispositions of Assets This is depreciation recapture.
Say you bought a truck for $50,000, claimed $30,000 in depreciation, and sold it for $35,000. Adjusted basis is $20,000, so the $15,000 gain is ordinary income at your regular rate. Owners who took large first-year deductions through Section 179 or bonus depreciation are often surprised by the recapture bill when they trade the vehicle in. A sale at a loss has no recapture, and the loss may be deductible as an ordinary business loss.