Vehicle and Mileage Deductions

If you drive for business, you can deduct the cost of that driving, but only the business part, and only if you can prove it. The IRS gives you two ways to figure the deduction: a per-mile rate or your actual costs. This guide explains both for 2025 returns, shows what is different for 2026 (when the rate changed in the middle of the year), and covers the limits on depreciating a vehicle.

What counts as business driving

Deductible trips include travel between workplaces, visits to clients or customers, business errands, and trips from home to a temporary work location. Driving between your home and your main place of work is commuting and is not deductible. If you use a vehicle for both business and personal reasons, only the business share counts, usually measured by miles.

Standard mileage rate

The IRS raised the 2026 rate partway through the year, so mileage driven in each half of 2026 is priced at that half's rate. Medical and charitable miles use different rates, and the charitable rate is fixed at 14 cents.

Rules for using the standard rate:

• Choose it in the first year you use the car for business. In later years you can switch to actual expenses, subject to depreciation rules.
• If you lease a car and use the standard rate, you must use it for the entire lease, including renewals.
• You cannot use it if you operate five or more cars at the same time (as in a fleet), if you previously used accelerated depreciation other than straight line, a Section 179 deduction or the special depreciation allowance on that car, or if you claimed actual expenses on a leased car.
• The rate already includes gas, maintenance, insurance and depreciation. Add only business parking and tolls.

Actual expense method

Under this method you deduct the business percentage of what the vehicle really costs: gas, oil, repairs, tires, insurance, registration, licenses, lease payments and depreciation, plus parking and tolls. If you drove 16,000 business miles out of 20,000 total, your business use is 80 percent. This often produces a larger deduction for a costly or heavily driven vehicle, but it requires saving every receipt. If you qualify for both methods, figure the deduction each way.

Depreciation limits on vehicles

Special annual caps apply to passenger cars. A passenger automobile is generally a four-wheeled vehicle rated at 6,000 pounds or less. For 2025, total depreciation (including Section 179 and bonus) for a passenger automobile placed in service that year is capped each year:

These limits are reduced if business use is under 100 percent. They are adjusted for inflation each year, so check the amounts for the year you place a vehicle in service.

Vehicles rated over 6,000 pounds, up to 14,000 pounds, are not passenger automobiles, but the Section 179 deduction on certain heavy SUVs is capped at $31,300 for 2025 and $32,000 for 2026. Depending on the vehicle, other depreciation, including 100 percent bonus depreciation for qualifying property acquired after January 19, 2025, may be available beyond that cap. Vehicles such as work vans with permanent shelving or trucks painted with the company name may be treated as qualified nonpersonal use vehicles and are outside the passenger car limits. See depreciation, Section 179 and bonus for the broader rules.

Cars and similar vehicles are listed property. If qualified business use is not more than 50 percent, you cannot claim Section 179 or bonus depreciation, and you may have to recapture a prior deduction if your business use later falls to that level.

Records you need

Keep a mileage log with the date, destination, business purpose and miles of each trip, along with odometer readings at the start and end of the year. The IRS expects adequate records or sufficient evidence, and estimates are not enough. A log, diary or electronic app can work if it records the same details. For actual expenses, keep receipts. Business expenses generally require receipts at $75 or more, and tolls and parking are easy to support with statements.

Employees, owners and reimbursements

An employee who drives a personal car for work generally cannot deduct unreimbursed costs. Employers can reimburse at the IRS rate under an accountable plan, and the reimbursement is tax-free to the employee.

Common mistakes

• Treating the daily commute as business mileage.
• No log, or a log created long after the fact.
• Switching methods without checking the depreciation history.
• Claiming 100 percent business use of a vehicle the family also drives.

Rideshare, delivery and trucking businesses have special features. See our pages for gig and rideshare drivers and truckers and transportation.

How we can help

We can compare the standard rate and actual expenses for your vehicles, prepare Form 4562 and Schedule C vehicle information, and review a planned vehicle purchase before you sign. Learn more about our business tax preparation services, or contact us.

Frequently asked questions

General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.