Are Oil Changes Tax Deductible for a Business?

Tax deductions can help reduce the amount of income subject to taxation, ultimately lowering a business’s tax liability. For many businesses, particularly those relying on vehicles for operations, understanding which expenses qualify for these deductions is important. Vehicle maintenance costs, including routine oil changes, can be tax-deductible under specific circumstances, provided they are directly linked to business activities.

General Rules for Vehicle Expense Deductions

To be deductible, vehicle expenses, including oil changes, must be considered “ordinary and necessary” business expenses. An ordinary expense is common and accepted in your industry, while a necessary expense is helpful and appropriate for your business. For instance, an oil change for a delivery van would generally meet these criteria.

Distinguishing between personal and business use of a vehicle is important. Only the portion of expenses directly attributable to business use is deductible. If a vehicle is used for both personal and business purposes, the costs must be allocated, with only the business percentage being eligible for a deduction. Commuting costs, which are expenses incurred for travel between a home and a regular place of work, are generally not deductible.

Common vehicle expenses that can be deducted when tied to business use include fuel, insurance, repairs, depreciation, registration fees, and maintenance such as oil changes. These deductions help to offset the costs of operating a vehicle for income-generating activities. The Internal Revenue Service (IRS) provides guidance on these deductions in publications like Publication 463, which details rules for vehicle expenses.

Who Can Deduct Oil Change Costs

Self-employed individuals, including sole proprietors, independent contractors, freelancers, and gig economy workers, can deduct oil changes and other vehicle expenses related to their business. These deductions are typically reported on Schedule C (Form 1040), Profit or Loss from Business.

For employees, the ability to deduct unreimbursed business expenses, including vehicle costs, was largely suspended by the Tax Cuts and Jobs Act of 2017. This means most employees can no longer claim these expenses on their federal income tax returns. However, limited exceptions exist for certain taxpayers, such as qualified performing artists, Armed Forces reservists, and fee-basis state or local government officials.

Owners of rental properties can also deduct vehicle expenses, including oil changes, if the vehicle is used for managing and maintaining their rental properties. This can involve travel to properties, collecting rent, or purchasing supplies. These expenses are typically reported on Schedule E (Form 1040), Supplemental Income and Loss, or Schedule C if the rental activity is considered a business.

Business entities, such as corporations and partnerships, can deduct vehicle expenses for company-owned vehicles or through mileage reimbursement programs for employees using personal vehicles for business.

Methods for Claiming Vehicle Expenses

There are two primary methods for claiming vehicle expense deductions: the standard mileage rate method and the actual expense method. Taxpayers can choose the method that provides the larger deduction, though certain restrictions apply.

The standard mileage rate method offers a simplified way to calculate deductions. With this method, taxpayers multiply their business miles driven by a set rate per mile established by the IRS. For instance, the business standard mileage rate is 70 cents per mile for 2025. This rate covers most vehicle operating costs, including depreciation, fuel, oil, repairs, insurance, and maintenance like oil changes, meaning individual receipts for these items are not needed. Parking fees and tolls incurred for business purposes can be deducted in addition to the standard mileage rate.

The actual expense method requires tracking and deducting all actual costs of operating the vehicle for business. This includes itemized expenses such as fuel, oil changes, repairs, tires, insurance, registration fees, lease payments, and depreciation. This method typically requires more detailed record-keeping, as all expenses must be substantiated with receipts and other documentation. To calculate the deductible amount under the actual expense method, the total actual expenses are multiplied by the business-use percentage of the vehicle. For example, if total actual expenses are $2,500 and the vehicle is used 75% for business, the deduction would be $1,875.

Maintaining Proper Records

Accurate and contemporaneous record-keeping is fundamental for substantiating vehicle expense deductions, regardless of the method chosen. The IRS requires detailed records to support any claimed deductions, and failing to maintain them can lead to the disallowance of expenses during an audit. Records should generally be kept for at least three years from the date the tax return was filed.

For those using the standard mileage rate, a daily mileage log is essential. This log should include the date of each trip, the destination, the business purpose, and the odometer readings at the start and end of the trip. This detailed record helps to prove the business miles driven.

If the actual expense method is utilized, comprehensive records of all vehicle-related costs are necessary. This includes receipts for all oil changes, fuel purchases, repairs, and other maintenance. Additionally, records of total mileage for the year, distinguishing between business and personal use, are required to calculate the business-use percentage. Digital scans of receipts and mileage tracking apps can simplify this process.