How the Tax Deduction for Vehicles Under 6000 Pounds Works

Using a vehicle that weighs under 6,000 pounds for business activities can generate a valuable tax deduction. Many self-employed individuals and small business owners are familiar with the tax advantages associated with heavy SUVs, but the rules for lighter passenger vehicles are distinct and offer their own set of benefits. The Internal Revenue Service (IRS) provides guidelines for this class of vehicle, which encompasses most cars, light trucks, and vans.

Choosing Your Deduction Method

The IRS requires you to choose between two calculation methods for deducting vehicle expenses: the standard mileage rate or the actual expense method. The standard mileage rate is a simplified approach, allowing you to deduct a set amount for each business mile you drive. This rate is calculated by the IRS to account for the variable costs of operating a car, such as gasoline and oil, as well as the fixed costs like depreciation and insurance.

In contrast, the actual expense method involves tracking and deducting the individual costs incurred to operate your vehicle for business. This method requires more detailed recordkeeping but can result in a larger deduction, particularly if you have a high-cost vehicle, significant repair bills, or drive fewer miles.

The choice between these methods has limitations. If you choose the standard mileage rate in the first year, you can switch to the actual expense method in a later year. However, if you initially choose the actual expense method, you cannot switch to the standard mileage rate for that same vehicle in any subsequent year.

The Standard Mileage Rate

For 2025, the IRS has set the business mileage rate at 70 cents per mile. You multiply your total business miles for the year by this rate to arrive at your deduction. For a leased vehicle, if you choose the standard mileage rate, you must use it for the entire duration of the lease, including any renewals.

While the standard rate is comprehensive, it does not cover all vehicle-related costs. You can take separate deductions for certain expenses. These include business-related parking fees and tolls, interest paid on a vehicle loan, and any state and local personal property taxes paid on the vehicle.

The Actual Expense Method

The actual expense method includes a wide range of expenditures. To calculate the deductible amount, you must first determine the percentage of your vehicle’s use that was for business. This is done by dividing the total business miles driven by the total miles driven for the entire year. That business-use percentage is then applied to your total vehicle expenses to find the deductible portion.

A component of the actual expense method is depreciation, which allows you to recover the cost of your vehicle over time. For passenger vehicles with a gross vehicle weight rating (GVWR) under 6,000 pounds, this deduction is subject to “luxury auto depreciation limits.” These IRS rules place a dollar cap on the amount of depreciation you can claim annually. For a vehicle placed in service in 2025, the limits are:

• First-year depreciation (including bonus depreciation): $20,400
• Second year: $19,800
• Third year: $11,900
• Each year thereafter: $7,160

These caps are the primary factor distinguishing the deduction for lighter vehicles from that of their heavier counterparts.

Recordkeeping and Reporting Requirements

Substantiating your vehicle deduction requires recordkeeping, regardless of the method you choose. The IRS requires a contemporaneous mileage log to support your claims, meaning you must record your mileage at or near the time of the trip. Your log must detail:

• The date of each trip
• The total miles driven
• Your business destination
• The specific business purpose of the travel

If you opt for the actual expense method, you must also retain all receipts and invoices for the costs you intend to deduct, such as fuel purchases, insurance statements, and repair bills.

For sole proprietors and single-member LLCs, the vehicle expense deduction is reported on IRS Form 1040, Schedule C, “Profit or Loss from Business.” The total calculated deduction is entered on Line 9 of Part II, “Expenses.” You must also provide details about your vehicle in Part IV of Schedule C, “Information on Your Vehicle.” This section asks for the date the vehicle was placed in service and the total miles driven for business, commuting, and other personal purposes. If you are claiming depreciation as part of the actual expense method, you will also need to file Form 4562, “Depreciation and Amortization.”