Using a car for business purposes can come with significant expenses, but the good news is that many of these costs are tax-deductible. Whether you’re a freelancer, small business owner, or part of a larger company, understanding what you can deduct can help you save money and optimize your financial planning.
Keep reading to learn key car-related expenses that qualify for deductions, the methods for calculating them, and the importance of maintaining accurate records to ensure compliance with IRS regulations.
Key Points
• You can deduct various car-related expenses for business use, including gas, oil, insurance, repairs, and depreciation. Keep detailed records to support your deductions.
• The IRS offers a standard mileage rate, allowing you to deduct a set amount per business mile driven.
• If you prefer, you can deduct the actual expenses incurred for business use. This requires thorough documentation of all car-related costs and the percentage used for business.
• Calculate the percentage of your car’s use that is for business purposes. This is crucial for determining the deductible portion of your expenses, whether using the standard mileage rate or actual expenses.
• Maintain a log of all business-related car usage, including dates, destinations, and purposes of trips.
Why Might You Use a Personal Car for Business?
If you are using your personal car for business purposes such as buying supplies, visiting clients, job site visits, business errands, or attending trade shows, your personal car meets the definition of a business vehicle. (On the other hand, if you need a specialized vehicle like a tow truck or a semi for your work, your personal car most likely won’t do the job.)
Using your personal car for business can save you the cost of having to buy another vehicle. You don’t have to worry about where to keep it, since it already “lives” at your house. And on top of all that, there are some tax benefits.
Can You Deduct Car Expenses When Using a Car for Business?
If you’re using a car for business purposes, some of the expenses you incur are tax deductible. The trick is knowing which expenses are considered qualified expenses for your business.
Because you can only deduct expenses related to the operation of the vehicle for business use and not personal, it can get a little tricky. That’s why there are two ways you can deduct expenses.
The first is by using the standard mileage rate set by the IRS. Keep track of the miles you drive for your business and multiply that times this year’s rate to get your tax deduction.
The other option is to keep track of all expenses you incur with the car and then use the number of miles driven for business versus total miles driven for the year to get the deductible portion.
Deductible Expenses
So what are the tax deductions you can write off if you’re using your own car for business use?
Things like car maintenance and repairs, oil changes, gas, tires, licenses, registration, and depreciation are all deductible expenses. You can also deduct parking fees and tolls, even if you use the standard mileage rate.
Nondeductible Expenses
The expenses incurred while using the vehicle for personal errands or trips aren’t deductible. So if you take a road trip for fun, you can’t write off the gas for the trip.
Also, you can’t deduct your miles from home to work, as that’s considered a personal expense.
To summarize, you can only write off expenses for the time you’re using the car for business.
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Other Considerations
If you’re using your car for business, there are a few other things to consider.
Depreciation
Over time, cars depreciate in value. You might have bought a car for $20,000 a decade ago, but only be able to sell it for $5,000 today. The IRS allows you to depreciate a car used for business. However, note that you must be using your car for business at least 50% of the time to qualify for depreciation.
The two methods for calculating depreciation are the straight line method and the declining balance method. Talk to your accountant to determine which is a better option for your tax situation.
Recordkeeping
The IRS can get pretty strict about checking financial records if any discrepancies or red flags pop up. The best thing you can do to prevent an audit (or make one go smoothly) is to keep accurate records.
Make sure to record all miles you travel for business. There are apps that will track this on your phone. You’ll need to note the starting mileage at the beginning of a new year in case you need to compare business miles to total miles driven.
Also, keep receipts from car maintenance visits, tire purchases, gas, and registration, and enter them into your accounting system under the appropriate category.
Employees Driving Company Cars
Another consideration is if your employees use their own cars for company activities, such as driving from one client to another or running errands for the company. Keep in mind you may be liable for them and their cars during business hours, depending on laws in your state.
Employees may be able to claim deductions for the miles they drive their own cars for business, and many employers reimburse employees for those costs, often on a per-mile basis.
Just like when you use your personal car for business expenses, employees can only claim deductions for the portion of the miles driven that are for business, so they’ll need to record those miles.
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Qualifying for the Standard Mileage Deduction
If you’d rather use the standard mileage deduction (it may be simpler than keeping track of all your business-related vehicle expenses), you must meet certain criteria, according to the IRS.
You can’t operate five or more cars at the same time (like if you have a fleet of delivery vans). You can’t have claimed a depreciation deduction for the car using any method other than straight-line, and you can’t have claimed the special depreciation allowance on the car.
To employ the standard mileage rate deduction, you must use it in the first year you have the vehicle for your business. After that, you can use the standard mileage rate or actual expenses for deduction.
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Current Standard Mileage Deduction Rate
If you use your car for business, charity, medical or moving purposes, you may be able to take a deduction based on the mileage used for that purpose, according to the IRS.
The standard mileage rates for 2025 are:
• Self-employed and business: 70 cents/mile
• Charities: 14 cents/mile
• Medical: 21 cents/mile
• Moving (military only): 21 cents/mile
Standard Mileage Deduction vs Actual Expenses
The IRS offers two ways of calculating the cost of using your vehicle in your business: the actual expenses or the standard mileage rate method. You can’t do both.
If you want to go the actual expenses route, track what you spend on your car, including lease payments, depreciation, repairs, oil, gas, new tires, and maintenance. For example, if 40% of your driving is for business, multiply your expenses by 40% to get your write-off.
According to the IRS, “You can generally figure the amount of your deductible car expense by using one of two methods: the standard mileage rate method or the actual expense method. If you qualify to use both methods, you may want to figure your deduction both ways before choosing a method to see which one gives you a larger deduction.”
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Where Do You Deduct Business Vehicle Expenses?
Now that you’re on top of recording business-related vehicle expenses, where do you actually get your deduction for using a car for business purposes? If you work with an accountant, she’ll handle it. You’ll just need to provide your receipts for vehicle expenses if you’re claiming actual expenses, as well as your total and business-related mileage.
If you file your own taxes, you’ll record this information on your Schedule C (Form 1040). Line 9 allows you to input expenses for cars and trucks. Section IV of the form will ask you questions about your business use of the car, including:
• When you first used the vehicle for business purposes
• How many of the total miles were business-related
• Whether the vehicle was available for personal use during off-duty hours
• Whether you or your spouse have another vehicle available for personal use
• Whether you have evidence to support your deduction
What Expenses Can You Deduct if You Borrow a Vehicle for Your Business?
Driving any car for business — including a borrowed car — entitles you to deduct expenses like maintenance and gas, though you cannot deduct depreciation because you don’t own the vehicle.
Can You Deduct the Purchase of a Vehicle for Your Business?
It sounds appealing to write off the cost of the car on your taxes. But there are some strict rules about this, and whether you’re buying a vehicle for a small business or a large one, you need to learn the ins and outs.
Section 179 Deductions
The IRS Tax Code Section 179 permits businesses to write off qualifying vehicles as business tax deductions.
The total section 179 deduction and depreciation you can deduct for a passenger automobile, including a truck or van, you use in your business in 2025 is $31,300 if the special depreciation allowance applies, or 40% of that if the special depreciation allowance does not apply.
Section 179 Requirements
Any business that purchases, finances, or leases business equipment in 2025 (spending less than $3,130,000) should qualify for the 179 deduction. Qualifying purchases include tangible goods, off-the-shelf software, and business vehicles.
To qualify for the deduction, you must purchase and place your new vehicle into service between January 1, 2025 and December 31, 2025.
Pros and Cons of a Business Buying a Vehicle
If you’re considering using a personal car for business, it’s important to consider the benefits and drawbacks.
Pros of Using Your Own Car for Business
Having one car for two purposes saves money. If you use a car for work and then after work for personal errands, and don’t need more than that, why pay for two separate vehicles?
Also, using your own car for business purposes gives you tax deductions you can take advantage of. They’re a huge perk of using a car for business and pleasure, and can reduce what you pay in taxes.
Another benefit is that your company can cover some of the costs of maintaining and repairing your vehicle. This means less out-of-pocket expense for you personally.
Cons for Using Your Own Car for Business
On the other hand, using any vehicle is an added expense for your business. If funds are tight, this may not be an expense you can afford, especially if you’re helping to cover large repair costs or registration fees.
You’ll also have the headache of tracking miles for business. It’s easy to forget to turn on your tracking app or check the odometer, and then you’ll miss out on those mileage deduction opportunities.
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Ways to Fund the Purchase of a Personal Car for Business
If you’re considering buying a car that you’ll use for business and wonder if you should purchase it through your company, the first question to ask yourself is: Will the vehicle be used only for business? If you plan to use it for personal activities as well, it’s better to buy it yourself than through your business.
Even if you buy the car yourself, you can still deduct those business-related expenses or claim your standard mileage rate.
If you don’t have the cash to pay for a car in your personal checking account, you may qualify for a car loan.
A Word on Refinancing a Car Loan
If you’re looking to save money on your car loan, you may want to consider an auto loan refinance. A refinance could help you lower your interest rate or reduce your monthly payment.
Interest rates rise and fall, so you may be paying far more than you need to on an old loan. If you’ve built your credit since you first took out the loan, you may also qualify for a lower rate. Use an auto loan refinance calculator to find out where you stand.
Before moving forward with car loan refinancing, consider the total cost to refinance a car. You may have to pay an early termination or transaction fee with the old lender, as well as registration or title transfer fees when the loan is approved. If the fees are less than what you’ll save, by all means, consider refinancing.
Recommended: Pros and Cons of Car Refinancing
The Takeaway
Using your car for business can lead to substantial tax savings if you understand and properly utilize the available deductions. Whether you opt for the standard mileage rate or the actual expense method, keeping detailed and organized records is essential to maximize your deductions and stay compliant with IRS regulations.
If you’re looking for other ways to save money on your vehicle, consider refinancing your auto loan. An auto loan refinance could potentially lower your interest rate or your monthly payment. Just keep in mind that if you extend your loan term, you’ll pay more in interest over the life of the loan.
If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.
FAQ
How can I buy a car for business use?
You can buy a car through your company if you plan to only use it for business purposes. However, if you want to also use it for personal activities, you must buy the car on your own. You can still deduct business expenses for the miles you drive for qualified business activities.
Where do you deduct business vehicle expenses?
Keep track of your car expenses and how many miles you drive in total and for business, and when you file your taxes, you’ll enter the information on your Schedule C or Form 1040. Line 9 allows you to enter car and truck expenses, and section IV asks questions about your business and personal use of the vehicle.
What expenses can you deduct if you borrow a vehicle for your business?
Whether you borrow, lease, or own a vehicle that you use for business, you can deduct expenses related to maintenance, repair, gas, tires, registration, fees, toll road fees, and parking fees.
What is the current standard mileage deduction rate?
For 2025, the standard mileage rate for self-employed and business is 70 cents a mile.
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