Can I Use the IRS Mileage Rate for Electric Cars?

Self-employed individuals and business owners can deduct vehicle expenses to lower their taxable income. A common approach is using the Internal Revenue Service (IRS) standard mileage rate, a simplified method for this calculation. For owners of electric vehicles (EVs), it is important to understand how these tax rules apply since their vehicles do not use traditional fuel. Understanding the available deduction methods is part of tax planning for any business that utilizes an EV.

Using the Standard Mileage Rate for Electric Vehicles

The IRS permits the use of the standard mileage rate for both fully electric and hybrid vehicles. For 2025, the rate for business use is 70 cents per mile. This all-inclusive rate simplifies recordkeeping by covering all fixed and variable operating costs, including vehicle depreciation, insurance, registration, maintenance, and repairs.

For an electric vehicle, the cost of electricity for charging is considered a fuel cost and is already factored into the 70-cent rate. This means you cannot deduct your electricity costs separately if you use the standard mileage rate.

If you choose this method for a car you own, you must use it in the first year the car is available for business use. In subsequent years, you can switch to the actual expense method if you find it more beneficial. For leased vehicles, however, if you select the standard mileage rate, you must continue to use it for the entire lease period, including any renewals.

The Actual Expense Method for Electric Vehicles

As an alternative to the standard mileage rate, you can deduct the actual costs of operating your electric vehicle for business. This method requires more detailed tracking but can sometimes result in a larger deduction. To use this method, you must track all expenses related to your vehicle throughout the year. These deductible costs include:

• Electricity used for charging
• Insurance premiums
• Registration fees
• Tires
• Any repairs or maintenance

A significant component of the actual expense method is depreciation. You can deduct a portion of your vehicle’s cost over several years. For electric vehicles, this can also extend to related equipment. The cost of installing a home charging station, including the charger itself and any wiring or installation fees, may also be depreciated as part of your business vehicle expenses.

To calculate your deduction under this method, you must first determine your business-use percentage. This is found by dividing the total miles driven for business by the total miles driven for all purposes during the year. You then apply this percentage to your total vehicle expenses, including depreciation, to find the deductible amount. For example, if 60% of your driving was for business, you could deduct 60% of your total electricity, insurance, and other costs.

Required Recordkeeping for Deductions

Regardless of the deduction method chosen, the IRS requires detailed and contemporaneous records to substantiate your claims. For both methods, you must maintain a reliable mileage log. Maintaining this log as trips occur, rather than recreating it at the end of the year, is an important requirement. The log must document the following for each business trip:

• The date
• Total miles driven
• The destination
• The business purpose of the travel

If you opt for the actual expense method, the recordkeeping is more extensive. In addition to the mileage log, you must keep all receipts and documentation for every expense you intend to claim. This includes electricity bills with charging costs highlighted, invoices for repairs and maintenance, insurance statements, and the purchase documents for the vehicle and any home charging equipment.

How to Claim the Vehicle Deduction

Once you have calculated your total vehicle deduction, you must report it on the correct tax form. For self-employed individuals, such as independent contractors or sole proprietors, this deduction is claimed on IRS Form 1040, Schedule C, “Profit or Loss from Business.” The total vehicle expense is entered in Part II, “Expenses,” on line 9.

Certain employees, such as qualified members of the Armed Forces, may be able to claim vehicle expenses using Form 2106, “Employee Business Expenses.” The Tax Cuts and Jobs Act of 2017 suspended the miscellaneous itemized deduction for unreimbursed employee travel expenses for most taxpayers. Therefore, the majority of employees who use their personal vehicle for work cannot currently claim this deduction on their federal tax return.