How to Write Off Car Expenses on Taxes

Navigating tax deductions for car expenses can reduce your taxable income when a vehicle is used for qualified purposes, such as business, medical, or charitable activities. Understanding eligibility, selecting a deduction method, and maintaining precise records are fundamental steps to accurately claim these expenses.

Qualifying Your Vehicle Use for Deductions

To deduct car expenses, vehicle use must be “ordinary and necessary” for the activity it supports. An ordinary expense is common and accepted in your trade or business, while a necessary expense is helpful and appropriate. Only the portion of vehicle use directly attributable to qualified activities can be deducted, requiring a clear distinction from personal use.

Business use includes travel between workplaces, client visits, and delivering goods. Commuting from home to a regular place of employment is generally not deductible. Self-employed individuals typically deduct these expenses on Schedule C (Form 1040). Employees generally cannot deduct unreimbursed car expenses, except for active duty military members moving due to a permanent change of station.

Medical use qualifies for travel for medical care, such as trips to doctors’ offices, hospitals, or pharmacies. Charitable use covers travel for a qualified charitable organization, like driving to volunteer or delivering donated items. Moving expense deductions are allowed in limited circumstances, such as for active duty military members moving due to a permanent change of station.

Selecting Your Deduction Method

When deducting car expenses, you have two methods: the Standard Mileage Rate or the Actual Expense Method. Your choice can impact current and future deductions, and initial selection may restrict future options. You can often determine which method provides the larger deduction by calculating both before making a final decision.

The Standard Mileage Rate offers a fixed rate per mile driven for qualified purposes, updated annually by the IRS. For 2025, the business use rate is 70 cents per mile. This rate covers depreciation, gas, oil, repairs, tires, insurance, and registration fees. Parking fees and tolls incurred during qualified travel can be deducted separately. This method has restrictions; it generally cannot be used if you operate five or more cars simultaneously for business, or if you claimed Section 179 or depreciation in a prior year for that specific vehicle. If you choose the standard mileage rate for a leased vehicle, you must continue using it for the entire lease term.

The Actual Expense Method requires tracking all costs associated with operating your vehicle for qualified use. This includes:
Gas and oil
Repairs and maintenance
Tires
Insurance premiums
Vehicle registration fees and license plates
Lease payments (if the car is leased)
Garage rent, parking fees, and tolls
Interest paid on a car loan (if used for business)

For owned vehicles, depreciation is a significant component. Depreciation allows you to recover the vehicle’s cost over its useful life. The Modified Accelerated Cost Recovery System (MACRS) is the standard depreciation method for vehicles placed in service after 1986, typically classifying cars as five-year property. Accelerated depreciation options include Section 179 and bonus depreciation.

Section 179 allows businesses to deduct the full purchase price of qualifying equipment, including certain vehicles, in the year they are placed in service. For 2025, the maximum Section 179 deduction is $1,250,000. For heavy SUVs (over 6,000 lbs GVWR but under 14,000 lbs GVWR), the limit is $31,300. To qualify, the vehicle must be used more than 50% for business, and the deduction is limited to the business-use percentage.

Bonus depreciation permits businesses to deduct a percentage of the cost of eligible assets in the year of purchase. For 2025, bonus depreciation is 40%, applied after any Section 179 deduction. Both Section 179 and bonus depreciation have limitations, including recapture provisions if business use falls below 50% in subsequent years.

To determine the deductible amount under the actual expense method, calculate the percentage of qualified use for the vehicle. This percentage is then applied to the total actual expenses, allowing you to deduct only the portion related to business, medical, or charitable activities. For instance, if your vehicle is used 70% for business, you can deduct 70% of your total actual expenses.

Documenting Your Car Expenses

Maintaining thorough records is important for substantiating car expense deductions, regardless of the method chosen. The IRS requires “adequate records” to support your claims. Proper documentation helps ensure compliance and is valuable in the event of an audit.

For every qualified trip, record specific details in a mileage log. This includes the date, destination, purpose, and mileage driven. Consistent odometer readings at the beginning and end of each tax year are also necessary to track total mileage.

If you use the Actual Expense Method, retain all receipts for expenses such as gas, repairs, insurance premiums, and lease payments. Records related to the vehicle’s purchase or lease should also be kept.

Record-keeping can be managed through manual logbooks, spreadsheets, or specialized mileage tracking applications. Digital scanning of receipts is a common practice. These records should be kept for a minimum of three years from the date your tax return was filed or its due date, whichever is later. If depreciating your vehicle, retain records for at least three years after the year you take your final depreciation deduction. Inadequate record-keeping can lead to the disallowance of deductions during an IRS audit.