To write off a car as a business expense, you deduct the business-use portion of what the vehicle costs you, using one of two IRS-approved methods: the standard mileage rate, which pays you a flat amount per business mile, or the actual expense method, which totals your real costs and depreciation. Both methods require a mileage log, and both are limited by how much you actually use the car for work. Which one saves you more depends on the vehicle’s price, how many miles you drive, and how heavy the car is.
Who Can Take the Deduction
This deduction belongs to self-employed people and business owners. If you file a Schedule C, report partnership income, or own an S-corp, you can claim vehicle expenses.
W-2 employees cannot. The Tax Cuts and Jobs Act suspended unreimbursed employee expenses starting in 2018, and the One Big Beautiful Bill Act made that suspension permanent. Even if your employer refuses to reimburse you for business driving, you cannot write those miles off on your personal return. The only route for an employee is an employer-sponsored accountable plan, where the company pays you back for documented business mileage and the reimbursement stays off your W-2.1eCFR. 26 CFR 1.62-2 – Reimbursements and Other Expense Allowance Arrangements
Figure Out Your Business-Use Percentage First
Everything downstream depends on one number. Divide your business miles for the year by your total miles driven. Drive 18,000 miles with 12,000 for business, and your business-use percentage is 67%. That percentage caps every deductible cost tied to the car.
Not all driving qualifies. Trips from home to your regular workplace are commuting, which is personal no matter the distance. Business miles are trips to clients, travel between work sites, supply runs, and any other driving with a direct business purpose.2Internal Revenue Service. Topic No. 510, Business Use of Car A vehicle used 100% for business, like a dedicated delivery van that never runs a personal errand, skips the percentage calculation. Everyone else needs a log, and without one the IRS will typically disallow the whole deduction.
Method One: The Standard Mileage Rate
The easier method is the standard mileage rate. Multiply your documented business miles by the IRS rate for the year. The 2025 rate is 70 cents per mile.3Internal Revenue Service. Standard Mileage Rates The IRS usually publishes the next year’s rate in December, so check irs.gov for the 2026 figure before you file.
That per-mile number is meant to cover gas, oil, insurance, maintenance, and depreciation combined. You cannot stack those costs on top of it. Parking fees and tolls for business trips are the only add-ons, and they’re fully deductible in addition to the mileage.4Internal Revenue Service. Publication 463 (2025), Travel, Gift, and Car Expenses
Timing matters. If you own the car, you have to choose the standard mileage rate in the first year it’s available for business use. You can switch to actual expenses later, but your depreciation then has to run on the straight-line method. If you lease, the choice is firmer: pick the standard mileage rate and you’re locked in for the whole lease, including renewals.2Internal Revenue Service. Topic No. 510, Business Use of Car The standard mileage rate is also unavailable if you run five or more vehicles at once.
Method Two: Actual Expenses
The actual expense method takes more bookkeeping but often beats the mileage rate for pricier cars or those with heavy operating costs. Add up every dollar you spent on the vehicle, then multiply the total by your business-use percentage.
Deductible operating costs include gas, oil changes, tires, repairs, insurance premiums, registration fees, and car washes. If you financed the car, the business share of your loan interest is deductible on Schedule C.5Internal Revenue Service. Instructions for Schedule C (Form 1040) Short-lived items like batteries come off in the year you pay for them. Parking and tolls on business trips are 100% deductible and aren’t reduced by your business-use percentage, since the trip itself was for business.4Internal Revenue Service. Publication 463 (2025), Travel, Gift, and Car Expenses
If You Lease: Watch the Inclusion Amount
Lease payments count as an operating expense under the actual expense method. But if the vehicle’s fair market value at the start of the lease crosses an IRS threshold, you have to reduce your deduction by a “lease inclusion amount.” For leases starting in 2026, that threshold is $62,000.6Internal Revenue Service. Rev. Proc. 2026-15 The inclusion amount is small early in the lease and grows over the term. You look it up in the IRS tables, prorate it for the days you used the car during the year, and multiply by your business-use percentage. It mirrors the depreciation caps that apply to purchased cars.
Depreciation If You Buy the Car
Under the actual expense method, depreciation is where the big dollars sit when you buy. It lets you recover the purchase price over time, and accelerated methods can concentrate most of that recovery into year one. Vehicles are five-year property under MACRS.7Internal Revenue Service. Publication 946 (2025), How To Depreciate Property
Passenger Vehicle Caps
The IRS puts dollar ceilings on depreciation for passenger automobiles, defined as four-wheeled vehicles made primarily for public roads with a gross vehicle weight rating (GVWR) of 6,000 pounds or less. The ceilings apply no matter what the car cost, so a $30,000 sedan hits the same first-year limit as a $60,000 one.
For a passenger vehicle placed in service in 2026 where bonus depreciation applies, the first-year cap is $20,300, followed by $19,800 in year two, $11,900 in year three, and $7,160 each year after that.6Internal Revenue Service. Rev. Proc. 2026-15 Opt out of bonus depreciation or own a car that doesn’t qualify, and the first-year cap drops to $12,300. All of those figures assume 100% business use; multiply by your business-use percentage to get your actual ceiling.
Section 179 and Bonus Depreciation
Two tools let you front-load depreciation instead of stretching it across five years. Both require more than 50% business use. If business use drops to 50% or below during the recovery period, you’ll owe recapture tax on the excess.
Section 179 lets you expense qualifying property in the year you place it in service. The overall 2026 Section 179 limit is $2,560,000, but for a passenger car under 6,000 pounds GVWR the passenger-vehicle caps override that bigger number. In practice, Section 179 alone cannot push a light passenger car’s first-year deduction past $20,300. You claim the election on Form 4562.8Internal Revenue Service. About Form 4562, Depreciation and Amortization
Bonus depreciation hits whatever cost is left after the Section 179 deduction. Under the One Big Beautiful Bill Act, 100% bonus depreciation is available for qualifying property acquired after January 19, 2025, and placed in service through the end of 2028.9Internal Revenue Service. One, Big, Beautiful Bill Provisions For a passenger car, that just means you reach the first-year cap faster; you still can’t exceed it. A narrow exception covers vehicles acquired before January 20, 2025, and placed in service in 2026, which qualify for only 20% bonus depreciation.
The Heavy Vehicle Exception
Vehicles with a GVWR over 6,000 pounds but not more than 14,000 pounds are exempt from the passenger-car depreciation caps. That covers many full-size SUVs, pickups, and cargo vans.
Heavy vehicles get their own Section 179 ceiling. The 2025 cap was $31,3004Internal Revenue Service. Publication 463 (2025), Travel, Gift, and Car Expenses, and the IRS adjusts it annually for inflation; the 2026 limit is approximately $32,000. Pickup trucks with a bed at least six feet long aren’t subject to the SUV cap and can use the full Section 179 limit. After the Section 179 deduction, 100% bonus depreciation applies to the remaining cost on vehicles acquired after January 19, 2025. Together, these can produce a near-complete write-off of a heavy vehicle in year one. On a $70,000 SUV used 100% for business, that potentially means deducting the entire purchase price up front, scaled down by your business-use percentage.
What Happens When You Sell the Car
Every dollar of depreciation you take reduces the vehicle’s tax basis. When you sell, trade in, or otherwise dispose of the car, that lower basis produces a larger taxable gain. This is depreciation recapture, and it catches a lot of business owners off guard.
Business vehicles are Section 1245 property. When you sell one at a gain, the portion of that gain tied to depreciation you already claimed is taxed as ordinary income rather than at long-term capital gains rates.10Internal Revenue Service. Publication 544 (2025), Sales and Other Dispositions of Assets The recapture amount is the lesser of your total depreciation or the gain on the sale. Anything beyond that is a Section 1231 gain, which may qualify for long-term capital gains treatment. You report the calculation on Form 4797.
An example: you buy a car for $50,000, claim $35,000 in depreciation over several years (basis now $15,000), and sell it for $25,000. The $10,000 gain is taxed entirely as ordinary income, because it falls inside the $35,000 you depreciated. Aggressive first-year write-offs magnify this. Deduct $60,000 on a heavy SUV in year one and sell it three years later for $30,000, and the whole sale price is effectively ordinary income. The deduction was a timing benefit, not free money. Factor that in before taking the biggest possible write-off on a car you plan to replace soon.
Records the IRS Will Actually Accept
Vehicle deductions get disallowed in audits for one reason more than any other: weak records. The burden of proof is on you, and the records have to be contemporaneous, meaning logged at or near the time of each trip rather than reconstructed at year-end.
A compliant mileage log records five things for every business trip: the date, the starting point, the destination, the business purpose, and the miles driven. You also need odometer readings at the start and end of each tax year, which is what makes the business-use percentage calculable in the first place. GPS-based mileage apps that log trips automatically tend to hold up better in audits than handwritten entries, though both are acceptable.
Under the actual expense method, you also need receipts or records for every operating cost: repairs, oil changes, insurance, registration, fuel. Credit card and bank statements help, but itemized receipts are stronger evidence for individual expenses. A dedicated business card for all vehicle costs makes the whole exercise easier.
The general rule is to keep records supporting any deduction for at least three years from the date you filed the return.11Internal Revenue Service. How Long Should I Keep Records? For depreciated vehicles, keep everything for three years after you fully depreciate or dispose of the car, whichever is later. If the IRS questions your depreciation years down the line, you’ll need the original purchase paperwork and every year’s mileage log to prove the deduction chain from the beginning.