Quick Answer
You may be able to write off part or all of a vehicle’s cost used for your trade or business, typically through Section 179, bonus depreciation, and/or regular depreciation, and you can deduct ongoing costs using either the standard mileage rate or the actual expense method, subject to business-use percentage and IRS limits [1] [2] [3] .
Who Qualifies to Deduct a Car for Business
Vehicle write-offs generally apply to self-employed individuals and business entities (sole proprietors, partnerships, LLCs, S corps, and corporations) when the vehicle is used for business purposes, and only the business-use portion is deductible [3] . For the 2024-2025 tax years, car expense deductions are typically available if you are self-employed or a business owner; employees receiving a W‑2 generally cannot deduct unreimbursed vehicle expenses until after 2025 under current rules [4] . Accurate records of business miles and expenses are essential to substantiate any deduction [1] .
Two Primary Ways to Deduct Ongoing Car Costs
1) Standard Mileage Rate
With the standard mileage method, you multiply your qualified business miles by the IRS standard rate for the year (for 2025, Block Advisors cites 70¢ per mile). This method simplifies recordkeeping but cannot be combined with first-year actual depreciation for the same vehicle once you’ve chosen certain methods in prior years; you must also track miles contemporaneously [1] . This approach can be advantageous for high-mileage, lower-cost vehicles.
Example: If you drive 12,000 business miles in 2025, a mileage deduction at 70¢/mile would be $8,400, subject to eligibility and substantiation requirements [1] . You would still keep logs showing date, purpose, start/end odometer, and destination.
2) Actual Expense Method
The actual method allows you to deduct the business-use percentage of operating costs, such as fuel, insurance, repairs, maintenance, tires, registration, lease payments, garage rent, and depreciation. You must keep receipts and allocate costs by business-use percentage (e.g., 70% business use means 70% of eligible costs are deductible) [1] [3] . This can yield larger deductions for newer or more expensive vehicles but requires detailed documentation.
Example: If your annual operating costs total $9,000 and your log shows 70% business use, your actual expense deduction would be $6,300, plus allowable depreciation, subject to IRS limits [3] .
Writing Off the Purchase: Section 179, Bonus Depreciation, and MACRS
Section 179 Deduction
Section 179 can allow an immediate write-off of all or part of the business-use portion of the vehicle in the year it is placed in service, provided business use exceeds 50% and annual dollar limits and vehicle-specific caps are observed. You must have purchased the vehicle for business, placed it in service during the tax year, and you cannot combine Section 179 with the standard mileage method in the same year for the same vehicle. If the car was originally acquired for personal use and only later converted to business use, Section 179 does not apply [2] . Recordkeeping must document acquisition and in-service date [2] .
Example: You buy a $40,000 vehicle and use it 65% for business. The potential Section 179 amount starts at $26,000 (65% of cost), subject to Section 179 limits and any luxury auto caps. You would reduce the vehicle’s depreciable basis by any Section 179 claimed and maintain business use over 50% to avoid recapture [2] .
Bonus Depreciation and Regular Depreciation
In addition to or instead of Section 179, you may claim bonus depreciation (where applicable) and then regular MACRS depreciation for the remaining basis, subject to the IRS’s annual vehicle depreciation caps and special rules for passenger autos and SUVs. Many businesses combine Section 179 (to the extent allowed) with bonus and then MACRS to accelerate recovery of the vehicle’s cost, but must respect business-use percentage and limits each year [3] . When Section 179 or bonus is not optimal, spreading deductions through MACRS over several years may fit cash flow and compliance needs [3] .
Key Eligibility and Limits to Watch
Common constraints include more-than-50% business-use for Section 179, annual caps for passenger automobiles, and special higher ceilings for certain SUVs and heavy vehicles. Detailed logs are essential to demonstrate business use and allocate costs accurately. A credible, dated mileage log and receipts for expenses are central to audit defense [2] [3] .
Source: luzenelhorizonteymas.blogspot.com
Choosing Between Mileage and Actual Expenses
Deciding which method produces the best result depends on your mileage, vehicle cost, operating costs, and recordkeeping preference. High-mileage drivers often benefit from the standard mileage rate; owners of newer or more expensive vehicles may see larger deductions from actual expenses plus depreciation. You must choose your method carefully-once you use the standard mileage rate in the first year the car is placed in service, you generally must continue with mileage for that vehicle, which affects your ability to claim certain depreciation deductions later. Consult current IRS guidance or a tax professional to confirm how first-year choices constrain future years [1] [3] .
Comparison example: If you project 18,000 business miles, mileage could yield a $12,600 deduction at 70¢/mile for 2025. If your actual operating costs are $10,000 and business use is 90%, actual expenses produce $9,000 plus allowable depreciation. You would model both scenarios before electing your method [1] .
What You Generally Cannot Deduct
Monthly car loan principal payments are not typically deductible; instead, tax recovery occurs through depreciation of the business-use portion of the vehicle’s cost basis. Interest on a business auto loan may be partially deductible when properly allocated to business use, but rules are specific and documentation is required. Many W‑2 employees cannot claim vehicle expenses for 2024-2025 unless reimbursed under an accountable plan by their employer [4] .
Recordkeeping and Compliance: Step-by-Step
- Establish business use: Keep a contemporaneous mileage log capturing trip date, purpose, start/end odometer, and destination. Calculate business-use percentage each year to apportion costs and depreciation accurately [1] .
- Select your method: Before filing, compare the standard mileage rate vs. actual expenses using realistic projections for miles, fuel, insurance, maintenance, and vehicle value. Consider long-term implications for depreciation elections [1] [3] .
- Document acquisition: Retain the bill of sale, financing documents, and the date the vehicle was placed in service. If using Section 179, ensure business use exceeds 50% and understand applicable caps. Keep proof of purchase source and in-service date [2] .
- Track expenses: Save receipts for fuel, repairs, insurance, registration, parking, and tolls. For actual method, record each cost; for mileage, prioritize logs and maintain records supporting business purpose [1] .
- Apply depreciation rules: If claiming Section 179, reduce the depreciable basis accordingly, then apply bonus and MACRS as allowed. Monitor business-use percentage each year to avoid potential recapture if business use drops below 50% [2] [3] .
- File correctly: Self-employed filers generally report vehicle deductions on Schedule C and attach any required depreciation forms. If you are unsure which forms apply, consider consulting a qualified tax pro and refer to official IRS publications by searching for “IRS Publication 463 business vehicle” on the IRS website [4] .
Real-World Scenarios
Consultant using a personal car 80% for work: She models standard mileage vs. actual. With 15,000 business miles at 70¢, mileage yields $10,500. Her actual costs are $8,500; at 80% business use, that’s $6,800 plus depreciation caps. Mileage appears larger; she keeps rigorous logs and elects mileage for the first year [1] .
Contractor buying a heavy SUV used 90% for business: He considers Section 179 and bonus depreciation to accelerate deductions, mindful of special SUV rules and limits. He documents in-service date, keeps job logs, and models depreciation over several years in case his business use falls in later years to avoid recapture risk [3] [2] .
W‑2 employee without an accountable plan: She drives to client sites but is a salaried employee. Under current rules, she generally cannot deduct unreimbursed employee vehicle expenses for 2024-2025. She asks her employer about implementing an accountable plan or mileage reimbursement policy [4] .
Common Pitfalls and How to Avoid Them
Poor logs: Recreated mileage at year-end is risky. Use a mileage app or written log contemporaneously to document business purpose, dates, and odometer readings [1] .
Mixing personal and business without allocation: Only the business-use portion is deductible. Maintain separate records and calculate percentages annually [3] .
Incorrect Section 179 claims: If you bought the vehicle for personal use first and later converted it, Section 179 generally isn’t allowed. Verify more-than-50% business use and be aware of annual limits before electing [2] .
Action Plan to Maximize Your Deduction
- Decide whether your vehicle use qualifies as business and estimate your annual business miles.
- Build a side-by-side projection: mileage vs. actual expenses + depreciation.
- If purchasing a vehicle this year, evaluate Section 179 eligibility, bonus depreciation options, and applicable caps before year-end.
- Create a documentation checklist: bill of sale, financing papers, in-service date, mileage log, receipts.
- If you are a W‑2 employee, consider requesting employer reimbursement through an accountable plan.
- Before filing, review current IRS guidance or consult a credentialed tax professional to validate your method and elections.
References
[1] Block Advisors (2025). Writing off a car for business: deduction methods and records.
[2] Patriot Software (2024). Business Use of Vehicles: Section 179 rules and recordkeeping.
[4] Jackson Hewitt (2025). Vehicle tax deductions: who can deduct and employee limitations.