Running a business means juggling a lot, like emails, client meetings, invoices, and everything in between. The last thing you need is another tax mystery, especially one involving your car. But if you use a personal vehicle for business, you might be leaving money on the table. The good news? With the right approach and a few smart habits, this deduction is one of the easiest to claim.
Let’s walk through what counts as business use, what the IRS wants to see, and how to make sure you claim every dollar you’ve earned.
What counts as business use?
Not all driving is created equal. Here’s how the IRS views it:
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Type of Use
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Description
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Strictly business use
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Vehicle is used only for business. You can typically deduct almost all related expenses, whether you use the standard mileage rate or the actual expense method.
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Mixed-use (business + personal)
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If the vehicle is used for both business and personal purposes, you’ll need to track either business mileage or allocate expenses based on business use percentage. Both the mileage and actual expense methods are allowed, as long as the business portion is well documented.
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Personal errands and commuting
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These miles are not deductible. Only business-related travel counts.
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Clear records are essential. You don’t have to give up your weekends, but you do need to track how much of your driving is business-related.
Can I deduct my car expenses?
This depends on how your business is set up.
- Self-employed: If you’re a sole proprietor or LLC owner, the IRS allows you to deduct car expenses tied to your business. This includes gas, repairs, insurance, and even depreciation.
- Employee: If you’re a W-2 employee, recent tax law changes eliminated most federal deductions for unreimbursed business driving. The better option is to ask if your employer offers a tax-free mileage reimbursement.
- Corporation owners: Use a reimbursement policy. Document all expenses, keep your receipts, and treat it like you would for any employee.
Paperwork matters. Sole proprietors typically file deductions on Schedule C. S-Corps and C-corps need to follow a formal process and use accountable plans.
What records do I need?
This is where many business owners miss out, but it doesn’t have to be complicated.
- Track your mileage: Every business trip should be logged with the date, miles driven, destination, and reason. You can use a notebook, spreadsheet, or app as long as you keep it consistent.
- Keep receipts: Save everything tied to your vehicle’s business use including gas, repairs, insurance, registration, and tolls
- Be proactive: Record trips as they happen. Waiting until tax time often means missed deductions and unreliable records.
Good records are your safety net. They help you get the deduction you’ve earned and back you up if the IRS asks questions later.
How do you calculate the deduction?
There are two ways to calculate your vehicle deduction.
Standard Mileage Rate
- Multiply your business miles by the IRS rate for the year
- This method rolls fuel, maintenance, depreciation, and general wear and tear into one per-mile deduction
- Best for low-expense vehicles or when you want a quick calculation
Actual Expense Method
- Add up all your vehicle costs: gas, repairs, insurance, and so on
- Multiply by your business-use percentage
- This takes more work but can yield a bigger deduction
Lease a vehicle? You must stick with the method you choose for the life of the lease.
Can I deduct a new business vehicle?
Yes, and it could be a big win.
- Depreciation: If business use is over 50 percent, part of the vehicle’s cost can be deducted up front. The rest is spread out over several years.
- Heavy vehicles: Trucks, vans, and large SUVs often qualify for special rules that allow you to deduct a large portion (or all) of the cost in the first year
- Business-use percentage: Only the portion used for business counts toward your deduction
- Tax law changes: Stay current. What’s allowed today may not be tomorrow. Work with a tax professional to be sure.
Buying a vehicle for your business can be a smart tax move, but only when the numbers make sense and the usage is clearly documented.
The Bottom Line
This is not just a small tax break. Claiming your business driving expenses can return real money year after year. It only takes a few minutes to get started, and the impact grows the longer you stay organized.
Start that mileage log today. Automate it if you can. And check in with your accountant if you have questions about what’s deductible. A little effort now means less stress later and more money left in your business.
