How Does Writing Off a Car for Business Work?
Learn the framework for deducting business vehicle expenses. This guide clarifies the process for tracking use and correctly calculating your tax write-off.
A car write-off is a tax deduction that allows self-employed individuals and business owners to recover the costs of using a vehicle for business purposes. This deduction reduces your overall taxable income, which in turn lowers the amount of tax you owe. It is not a dollar-for-dollar reimbursement but a subtraction from your income before taxes are calculated. The value of this deduction is directly tied to the extent you use your vehicle for qualifying business activities, accounting for wear and tear, fuel, and other operational costs.
Determining Business Use of Your Vehicle
Understanding the distinction between different types of driving is necessary for calculating your vehicle deduction, as only business use is deductible. Business use involves travel that is ordinary and necessary for your trade or business. Examples include driving to meet with a client, traveling between different office locations, or running business-related errands such as picking up supplies from a vendor.
A separate category of driving is commuting, which the IRS defines as travel between your home and your main or regular place of work. These miles are considered a personal expense and are not deductible. For example, if you own a flower shop, your daily drive from your house to the shop is non-deductible commuting.
Any driving that is not for business or commuting is personal use. This includes trips to the grocery store, taking children to school, or driving on vacation. If you drive from your office to a client meeting and then directly to a personal appointment, only the portion of the trip from the office to the client’s location qualifies as a business expense.
If you use your vehicle for both business and personal trips, you must divide your expenses based on the mileage for each use. The total business miles driven in a year compared to the total miles driven overall determines the business-use percentage of your vehicle.
Choosing Your Deduction Method
Taxpayers have two distinct options for calculating their vehicle deduction: the standard mileage rate or the actual expense method. You must choose one method per vehicle for a given tax year. The standard mileage rate is a simplified approach where you deduct a predetermined amount for each business mile you drive. For 2025, the rate is 70 cents per mile, which accounts for most vehicle operating costs, including gas, maintenance, insurance, and depreciation.
The alternative is the actual expense method, which involves tracking and deducting the business portion of all your vehicle-related costs. This can be more complex but may yield a larger deduction if you have high vehicle costs. The standard mileage rate is simpler, while the actual expense method might be more beneficial if your vehicle has low fuel efficiency or requires frequent and costly repairs.
If you choose the actual expense method in the first year a car is used for business, you must continue using that method for as long as you use that car for business. Conversely, if you start with the standard mileage rate, you can switch to the actual expense method in a later year.
Required Information and Recordkeeping
Regardless of the deduction method chosen, every taxpayer must maintain a detailed mileage log. This log is the primary evidence to support your deduction in an IRS audit. For each business trip, your log must document:
- The date of the trip
- Your starting point and destination
- The business purpose of the trip
- The total miles driven
It is recommended to record the vehicle’s total starting and ending odometer reading for the year.
For those who opt for the actual expense method, you must retain receipts for every cost associated with the vehicle. These include records of:
- Gasoline purchases, oil changes, and tire replacements
- Repairs and maintenance
- Auto insurance premiums
- Vehicle registration fees
- Lease payments, if the car is leased
If you own the vehicle and use the actual expense method, you must also gather specific information to calculate depreciation. This requires knowing the vehicle’s original cost and the date it was first “placed in service” for your business.
Calculating and Claiming the Deduction
To calculate your deduction using the standard mileage rate, multiply your total business miles from your log by the applicable rate. For 2025, this would be your total business miles multiplied by 70 cents. This final figure is then reported on your tax return.
Calculating the deduction under the actual expense method is a multi-step process. First, determine your business-use percentage by dividing your total business miles by the total miles the car was driven during the year. Next, sum all your documented vehicle expenses and multiply the total by your business-use percentage to find the deductible amount.
Depreciation is a part of the actual expense method for a vehicle you own. Businesses can use accelerated depreciation methods like Section 179 or bonus depreciation to deduct a large portion of a vehicle’s cost in the first year. For 2025, the Section 179 limit for qualifying heavy SUVs is $31,300, and the bonus depreciation rate is 40%. These options require the vehicle to be used more than 50% for business.
The final deduction amount is reported on Schedule C (Profit or Loss from Business) if you are a sole proprietor or single-member LLC. If you claim depreciation, you must also file Form 4562, Depreciation and Amortization. This form details the vehicle’s cost, the depreciation method used, and the calculated depreciation amount for the year.