Can You Write Off a Car for Business?

It is possible to claim a tax deduction for a vehicle used for business purposes, but this requires adherence to Internal Revenue Service (IRS) regulations and diligent recordkeeping. Successfully claiming this deduction depends on understanding which activities count as business use and choosing a calculation method. The process is governed by specific rules that distinguish between deductible business travel and non-deductible personal use.

Qualifying Business Use of a Vehicle

To deduct vehicle expenses, the travel must be for a specific business purpose. This includes driving from your office or primary place of business to meet with a client, traveling to a temporary work location, or visiting a supplier. Trips between different business locations, such as from a main office to a satellite branch, are also considered deductible business mileage.

The daily drive from your home to your main business location is a personal commute and is not deductible, even if you make business calls during the drive. These miles are viewed as a personal expense necessary to get to your place of work, not a cost of conducting business.

The rules for commuting change if your residence qualifies as your principal place of business. To meet this standard, you must use a specific area of your home exclusively and regularly for administrative or management activities, and have no other fixed location for these tasks. When your home office is your principal place of business, trips from your home to other business-related destinations, like a client’s office, transform from non-deductible commutes into deductible business travel.

Calculation Methods for Vehicle Deductions

Taxpayers have two options for calculating their vehicle deduction: the standard mileage rate or the actual expense method. The standard mileage rate is set by the IRS. For 2025, the rate is 70 cents per mile driven for business purposes. This per-mile rate is designed to cover the costs of operating a vehicle, including gasoline, oil, maintenance, repairs, insurance, and a portion for depreciation.

To calculate the deduction using this method, you multiply your total business miles for the year by the applicable rate. For instance, if you drove 10,000 business miles in 2025, your deduction would be $7,000. This method simplifies recordkeeping, as you do not need to save receipts for every individual vehicle expense.

The alternative is the actual expense method, which involves tracking and deducting the specific costs incurred to operate the vehicle for business. This requires more detailed recordkeeping but can result in a larger deduction. Deductible expenses under this method include fuel, oil changes, tires, repairs, car washes, insurance premiums, vehicle registration fees, and lease payments.

To use the actual expense method, you must first determine your vehicle’s business use percentage. This is calculated by dividing the total number of miles driven for business by the total miles driven for the entire year. You then apply this percentage to your total vehicle expenses to find the deductible amount. Depreciation is also a component of the actual expense method.

Understanding Vehicle Depreciation

Depreciation is a component of the actual expense method, allowing you to deduct the cost of your vehicle over its useful life. You cannot use the standard mileage rate and also claim a separate deduction for depreciation, as an allowance for it is already built into the standard rate.

The primary method for calculating vehicle depreciation is the Modified Accelerated Cost Recovery System (MACRS). This system allows for larger depreciation deductions in the early years of a vehicle’s life. However, the IRS imposes annual limits on the amount of depreciation that can be claimed for passenger automobiles, often referred to as the “luxury auto depreciation limits.”

Certain tax provisions can provide more substantial upfront deductions. Section 179 of the tax code allows businesses to elect to recover all or part of the cost of certain qualifying property as an expense in the year it is placed in service. Bonus depreciation is another provision that allows for an additional first-year deduction, though the rate is being phased down. For property placed in service in 2025, the bonus depreciation rate is 40%.

An exception to the luxury auto limits applies to heavy vehicles with a Gross Vehicle Weight Rating (GVWR) over 6,000 pounds. These vehicles are not subject to the same annual depreciation caps as lighter passenger vehicles. For certain heavy SUVs and trucks with a GVWR between 6,001 and 14,000 pounds, the Section 179 deduction is capped at $31,300 for 2025. The ability to deduct the full purchase price generally applies only to vehicles with a GVWR over 14,000 pounds or those designed for cargo.

Essential Recordkeeping for Vehicle Expenses

The IRS requires detailed and contemporaneous records to substantiate any vehicle expense deduction. A contemporaneous record is one that is made at or near the time of the travel or expense. This documentation is necessary to defend your deduction in the event of an audit.

For both the standard mileage and actual expense methods, a mileage log is mandatory. For each business trip, your log must document the:

• Date
• Total miles driven
• Destination of your travel
• Specific business purpose of the trip

A detailed log can be kept in a notebook, on a spreadsheet, or by using a GPS-based mobile application designed for mileage tracking.

If you opt for the actual expense method, your recordkeeping duties expand. You must retain receipts, invoices, and other documentation for every expense you intend to claim. This includes records for fuel purchases, oil changes, tire replacements, insurance payments, registration renewals, and any repairs performed on the vehicle.

The burden of proof rests on the taxpayer. Maintaining organized and complete records throughout the year is more effective than attempting to reconstruct them at tax time. These records support the deduction claimed on your return and provide the necessary data to choose between the two methods.

Reporting Vehicle Deductions on Your Tax Return

For self-employed individuals, such as sole proprietors and independent contractors, vehicle expenses are reported on Schedule C (Profit or Loss from Business), which is filed with your Form 1040. This form is used to calculate the net income or loss from your business activities.

The calculation of the vehicle deduction itself is performed on IRS Form 4562, Depreciation and Amortization. This form must be filed whether you use the standard mileage rate or the actual expense method. The final deduction amount from Form 4562 is then transferred to the appropriate line on your Schedule C.

Following the passage of the Tax Cuts and Jobs Act of 2017, most employees can no longer deduct unreimbursed business expenses. If you are a W-2 employee who uses your personal vehicle for work and is not reimbursed by your employer, you cannot claim a deduction for those vehicle expenses on your federal tax return. This suspension of the miscellaneous itemized deduction for employee business expenses is in effect through 2025.