How to write off a car for business as a tax deduction
8 min read
If you use a car, truck, van, or SUV for business purposes, you may be able to deduct some or all your vehicle-related expenses on your tax return. The IRS allows several vehicle write-off strategies, and the right approach depends on how the vehicle is used, how much you drive for business, and the expenses you incur.
Business vehicle write-off: Who can deduct vehicle expenses?
The IRS allows certain taxpayers to deduct vehicle expenses related to business use. Most commonly, this includes self-employed individuals, sole proprietors, and qualifying business owners who use a vehicle for business activities.
Examples of qualifying business driving include:
- Driving to meet clients or customers
- Traveling between business locations
- Driving to the bank, post office, or office supply store for business purposes
- Meeting with your accountant, attorney, or other business advisors
In general, commuting between your home and regular workplace is not deductible. Personal errands and personal trips also don’t qualify.
Note: Vehicles used as part of a fleet may have different rules and may not qualify for the standard mileage method.
What vehicle write-off strategies are allowed by the IRS?
The IRS typically allows business owners to write off vehicle expenses using one of two methods:
- Standard mileage rate method
- Actual expense method
Each method calculates your deduction differently.
Because every business situation is different, the strategy that produces the largest deduction can vary from one taxpayer to another.
How do vehicle write-off strategies differ by use?
Your available write-off strategies often depend on how the vehicle is used.
Vehicles used exclusively for business
If the vehicle is used 100% for business, you may generally deduct 100% of qualifying expenses under the method you choose.
Vehicles used for both business and personal driving
If the vehicle has mixed use, you can generally deduct only the business-use percentage of your qualified expenses.
For example:
- Total miles driven during the year: 20,000
- Business miles driven: 12,000
Business-use percentage:
12,000 ÷ 20,000 = 60%
In this example, 60% of eligible vehicle expenses may qualify for deduction under the actual expense method.
Purchased vehicle vs. leased vehicle
The rules for switching deduction methods and claiming certain expenses may differ depending on whether you own or lease the vehicle. Documentation requirements also vary.
Heavy vehicles and certain SUVs
Some heavier vehicles may qualify for additional depreciation-related benefits, subject to IRS requirements and annual limitations.
Do I qualify for a business vehicle write-off?
Get answers from a trusted Small Business Certified Tax Pro
Standard mileage rate method vs. actual expense method: Which should you choose?
The best method is usually the one that results in the larger tax deduction while remaining compliant with IRS rules.
Standard mileage rate method
With this method, you multiply your business miles by the IRS standard mileage rate for the applicable tax year. The rate is adjusted periodically by the IRS.
You may also be able to deduct qualifying tolls and parking fees separately.
Pros:
- Easier recordkeeping
- Simpler calculations
- Often beneficial for fuel-efficient vehicles
- Fewer expense categories to track
Actual expense method
With the actual expense method, you calculate your total qualifying vehicle expenses and deduct the business-use portion. Qualifying expenses may include:
- Gas and oil
- Maintenance and repairs
- Tires
- Insurance
- Registration fees
- Lease payments
- Loan interest (when applicable)
- Garage rent
- Tolls and parking
- Depreciation
Note: The car loan interest deduction is available only for interest paid on a qualifying vehicle purchased for personal use. If the vehicle is used for both personal and business purposes, the loan interest must be allocated between those uses. Only the personal-use portion may be eligible for the new deduction, while the business-use portion may be deductible as a business expense if otherwise allowable. Do not deduct the same interest twice.
Side-by-side comparison of the Standard Mileage Rate Method and Actual Expense Method
| Feature | Standard Mileage Rate Method | Actual Expense Method |
|---|---|---|
| Based on miles driven | Yes | No |
| Requires tracking actual vehicle costs | No | Yes |
| Includes depreciation calculations | Not allowed | Yes, depreciation may be included, factoring in Section 179 expensing and bonus depreciation when eligible. |
| Simpler documentation | Generally, yes | Generally, no |
| May benefit high-cost vehicles | Sometimes | Often |
| Depreciation | Included in mileage rate | Claimed separately when eligible |
| Additional depreciation options | — | — |
| ↳ Section 179 expensing | No | May be available when eligible |
| ↳ Bonus depreciation | No | May be available when eligible |
The only way to know which method yields the larger deduction is to compare both calculations when permitted under IRS rules and consider future year consequences.
Can I write off a vehicle purchase for business use?
If you own the vehicle and use the actual expense method, you may be able to recover some or all the vehicle’s cost through depreciation, Section 179 expensing, bonus depreciation, or a combination of these tax benefits when eligible.
Generally:
- The vehicle must be used for business purposes
- Only the business-use percentage may be deductible
- Certain vehicles and vehicle weights are subject to special rules and limits
- Section 179 and bonus depreciation eligibility requirements must be met
If you use the standard mileage rate method, you generally cannot separately deduct the vehicle’s purchase price.
How do write-off strategies affect depreciation?
Your vehicle write-off strategy can directly affect how depreciation is treated both now and in future tax years.
If you use the standard mileage rate method
The IRS mileage rate already includes a depreciation component. Because of this, your vehicle’s tax basis may be reduced over time even though you’re not separately claiming depreciation each year.
If you use the actual expense method
Depreciation generally becomes a separate deduction that may be claimed along with other vehicle expenses, subject to applicable limitations. Depending on the vehicle and business-use percentage, this could significantly increase your deduction.
Why depreciation matters
Depreciation can affect:
- Current-year deductions
- Future year depreciation deductions
- Vehicle basis calculations
- Potential gain or loss when the vehicle is sold or otherwise disposed of
Because depreciation affects future tax outcomes, it’s important to maintain accurate records from the year the vehicle is first placed into business service.
How to write off a car for business use
- Determine business use
Before claiming a tax deduction, determine how much of the vehicle’s use is related to business activities. If you use the same vehicle for both business and personal driving, only the business-use portion of your expenses is generally deductible. - Choose a deduction method
Select either the standard mileage deduction or the actual expense method. The method that results in the larger deduction will depend on factors such as your business mileage, vehicle costs, and eligibility requirements. - Track business mileage
Keep a record of your business miles throughout the year. Be prepared to document your total annual mileage, business mileage, dates of travel, destinations, and business purposes for each trip. - Gather vehicle expense records
If you’re considering the actual expense method, collect documentation for vehicle-related costs such as gas, maintenance, repairs, insurance, registration fees, lease payments, loan interest, parking fees, and tolls. - Calculate your deduction
Use your chosen method to determine your deduction amount. With the standard mileage rate method, multiply your business miles by the applicable IRS mileage rate. With the actual expense method, calculate the business-use percentage of your qualifying vehicle expenses. - Consider depreciation benefits
If you use the actual expense method and own the vehicle, you may qualify for additional tax benefits such as depreciation deductions, Section 179 expensing, or bonus depreciation. Eligibility and limits vary based on the vehicle and how it’s used. - Complete the required tax forms
Report your tax deduction for the business use of your vehicle on the appropriate tax forms for your business structure. (See the table below.) Depending on your situation, you may also need to complete additional forms to claim depreciation-related deductions. - Keep supporting documentation
Retain mileage logs, receipts, invoices, and other supporting records in case the IRS requests documentation for your tax deduction. Good recordkeeping can help substantiate both your business use and your deduction calculation.
Tax forms needed to write off a car
The form you’ll use depends on your tax situation.
| Taxpayer type | Common form |
| Sole proprietors and single-member LLCs | Schedule C |
| Partners and certain LLC members | Schedule E (for qualifying unreimbursed partnership expenses) |
| Certain qualifying employees | Form 2106 |
| Taxpayers claiming depreciation | Form 4562 |
| Certain volunteer or medical mileage situations | Schedule A |
Need help understanding mileage tax deductions?
Block Advisors has your back.
How Block Advisors can help with business vehicle tax deductions
Still have questions about how to write off a car, truck, SUV, or other business vehicle? A Block Advisors Small Business Certified Tax Pro can help you determine which deduction method may work best for your situation, identify eligible expenses, and help ensure you’re meeting IRS recordkeeping requirements.
Need help beyond tax preparation? Our business formation, bookkeeping, and payroll services support your small business year-round.
Make an appointment to get help today.
This article is for informational purposes only. The content may not constitute the most up-to-date information and should not be construed as legal advice.