IRS Automobile Tax Deductions Explained

If you use a car, van, pickup or SUV for business, you can deduct the business portion of its cost. The IRS offers two methods, the standard mileage rate and actual expenses, and either way you need good records. Here’s how vehicle deductions work for 2026.

Who Can Deduct Vehicle Expenses

Self-employed people (on Schedule C or Schedule F), partners, landlords and business entities can deduct business vehicle costs. Employees generally can’t deduct unreimbursed vehicle expenses on their federal return. They should ask their employer about an accountable reimbursement plan instead.

2026 Standard Mileage Rates

• Business: 72.5 cents per mile from January 1 through June 30, 2026, and 76 cents per mile from July 1 through December 31, 2026, after a mid-year increase, according to the IRS
• Charitable: 14 cents per mile
• Medical and military moving: 20.5 cents per mile for the first half of 2026, and 23.5 cents from July 1

Parking fees and tolls for business trips are deductible in addition to the mileage rate.

Standard Mileage vs. Actual Expenses

• Standard mileage: simple. Multiply business miles by the rate. For a vehicle you own, you must use it in the first year the vehicle is used for business to keep the option later. You can’t use it if you operate five or more vehicles at the same time.
• Actual expenses: deduct the business-use percentage of gas, oil, repairs, tires, insurance, registration, lease payments or depreciation, and interest (for self-employed taxpayers). Depreciation on passenger vehicles is subject to annual “luxury auto” limits. Heavier SUVs and trucks over 6,000 lbs. gross vehicle weight have different, often larger, limits.

What Doesn’t Count

Commuting between home and a regular workplace isn’t deductible. Trips from a home office that’s your principal place of business, trips between work locations, and trips to meet clients generally are.

Recordkeeping Requirements

Under IRC 274(d), you need a contemporaneous log showing the date, destination, business purpose and miles for each trip, plus total miles for the year. A mileage app works well. Without records, the IRS can disallow the deduction entirely.

New: Car Loan Interest Deduction (2025-2028)

For tax years 2025 through 2028, individuals may deduct up to $10,000 a year of interest on a loan for a new personal-use vehicle whose final assembly was in the United States. The deduction phases out at higher incomes. This is separate from the business vehicle deduction.

Related: Form 8829: Home Office and Small Business Tax Preparation Tips.

Get Help From Diehl CPA

Tax rules change often, and the right answer depends on your full financial picture. Diehl CPA, led by Mark Diehl, CPA, prepares returns and builds tax plans for investors, retirees and closely held businesses. Learn about our tax return preparation and investment tax planning services, or contact us to talk through your situation.

This article is general information, not tax or legal advice for your specific situation. Updated October 2026.