Business Vehicle Center

The vehicle & the year

Business use from your miles: 80.0%

What the vehicle actually cost this year

Loan interest on a business vehicle belongs in the actual-cost column too (add it under Other operating costs) — unless the vehicle is on the standard mileage rate, where interest is already inside the rate. Parking fees and tolls on business trips are deductible on top of either method and are not in this comparison.

The verdict — 2025, both methods priced

Switching rules (owned): Owned vehicles: choose standard mileage in the FIRST year the vehicle is used for business to keep both doors open. Take actual expenses with §179 or MACRS depreciation first, and the mileage rate is closed for that vehicle for good; switch from mileage to actual later and depreciation must be straight-line.

The mileage rate already contains depreciation: 33¢ of every business mile is treated as depreciation and reduces your basis in the vehicle (IRS Notice 2025-5) — one reason a later sale can show taxable gain even on an old car.

🚧 The 50% cliff — §280F(b)

A vehicle is listed property: the IRS assumes it tempts personal use, so it watches the business-use percentage every year. Above 50% business use, the fast write-offs live — §179 expensing and bonus depreciation. At 50% or below, both vanish: the vehicle drops to straight-line depreciation under the alternative depreciation system, and for a passenger automobile the §280F caps still apply.

The cliff has a second edge: buy a vehicle at 80% business use, claim the big first-year write-off, then let business use fall to 50% or below in a later year inside the recovery period, and the IRS recaptures the excess of what you claimed over straight-line — as ordinary income. Brochures print the first year. This page prints the cliff.

📓 The mileage log is the deduction

Under §274(d), vehicle deductions live or die on substantiation — and the record has to be made at or near the time of the trip, not rebuilt in April. A compliant log holds, for every business trip:

• The date of the trip.
• Where you went — the destination or route.
• The business purpose — who, what, and why it was business.
• The miles — trip miles, plus odometer readings that prove the year's total miles (the denominator of your business-use percentage).

No log, no deduction — examiners disallow the whole vehicle claim, not just the undocumented trips. A phone mileage app, a notebook in the console, or a weekly calendar habit all work; a spreadsheet invented at filing time is the classic audit failure (IRS Publication 463).

🏠 Commuting is not business

The drive from home to your regular workplace is commuting — never deductible, under either method, no matter how far. What is deductible: travel from a regular workplace to a temporary work location or a second job the same day; travel from home to a temporary work location when you have no regular workplace (or when your home is your principal place of business and the trip is outside your metro area); and client, site, and delivery trips in between.

Put a sign or wrap on the car and the commute is still a commute — advertising on the vehicle does not convert personal miles into business miles. It does make the signage cost deductible. (IRS Publication 463.)

🧑‍💼 W-2 employees: the closed door — now permanent

If you drive your own car for an employer who does not reimburse you, there is no federal deduction — not on Schedule A, not anywhere on your own return. The Tax Cuts and Jobs Act suspended the unreimbursed-employee-expense deduction for 2018–2025, and the 2025 law (P.L. 119-21) made that disallowance permanent: the IRS says so in its own 2026 mileage guidance (Notice 2026-10). The deduction was expected to return in 2026 for a generation of tax software defaults; it did not.

The working route is the next card: reimbursement under your employer's accountable plan, which is tax-free to you and deductible to them. A handful of states still allow an employee deduction on the state return — this page is federal.

🤝 Accountable plans: the employer's door

An accountable plan is the IRS-approved way for a business to put vehicle money back in a driver's pocket tax-free. Three tests, all required: the expense has a business connection; the driver substantiates it (the same mileage log, handed over within a reasonable time — the safe harbor is 60 days); and any advance beyond the substantiated amount is returned.

Meet the tests and reimbursements at or under the federal mileage rate never touch the driver's W-2. Fail them and the same money is wages — taxed to the driver, payroll-taxed to the business. A per-mile reimbursement policy plus the log habit is one of the cheapest benefits an employer can run.

🏢 S-corp owners: whose name is on the title?

For a shareholder-employee, the title decides everything. Titled to the corporation: the S-corp deducts the actual costs and depreciation, and the personal-use share comes back to you as wages (a fringe benefit valued and reported) — the corporation cannot pretend your grocery runs are freight. Titled to you personally: you are an employee of your own corporation, and the closed door above applies to your personal return.

The working structure for a personally-titled car is an accountable plan in the corporation's name: you keep the mileage log, the corporation reimburses at the federal rate and deducts it, and the money reaches you tax-free. What never works: the corporation depreciating a vehicle it does not own.

🚗 The personal car-loan interest deduction — the same car cannot be both

Separate from everything above, the 2025 law created a deduction for personal driving: up to $10,000 a year of interest on a loan for a new vehicle bought for personal use, for tax years 2025 through 2028. The gates are exact: the loan was originated after December 31, 2024 and is secured by the vehicle; the vehicle's final assembly was in the United States; and it is rated under 14,000 lbs GVWR. It is claimed above the line on Schedule 1-A, Part IV — itemizing is not required — and the vehicle's VIN must appear on the return. Your lender reports the interest on an interest statement; a refinance generally keeps the interest eligible. Leases and used cars never qualify.

It phases out with income: the $10,000 ceiling shrinks by $200 for every $1,000 (or part of $1,000) of modified AGI over $100,000 — $200,000 filing jointly — and is gone entirely at $150,000 / $250,000. (Head of household uses the $100,000 line; the final regulations, TD 10054, settled that.)

The bright line: one car, one treatment per mile and per dollar. The business-use share of a vehicle follows the business rules on this page — inside actual expenses, or already inside the mileage rate — and only the personal-use share of the interest can meet this deduction, if the car and loan pass every gate. You never claim the same interest twice. (IRS Fact Sheet FS-2025-05; IRS Publication 6126.)

Every figure on this page, with its source

• Business mileage: 2025 — 70¢ (Notice 2025-5). 2026 — 72.5¢ Jan–Jun, 76¢ Jul–Dec (Notice 2026-10; Announcement 2026-11). Depreciation inside the rate: 33¢ (2025), 35¢ (2026), same notices.
• §179 SUV cap: $31,300 for 2025 (Rev. Proc. 2024-40); $32,000 for 2026 (Rev. Proc. 2025-32). Overall §179 limits: $2,500,000 / $2,560,000, same sources.
• §280F passenger-auto caps: 2025 — $20,200 with bonus / $12,200 without, then $19,600 / $11,800 / $7,060 (Rev. Proc. 2025-16). 2026 — $20,300 / $12,300, then $19,800 / $11,900 / $7,160 (Rev. Proc. 2026-15). Caps are multiplied by business-use percentage (Publication 946).
• Bonus depreciation: 100%, permanent, for property acquired after January 19, 2025 (P.L. 119-21 §70301; IRS Notice 2026-11).
• Employee expenses: disallowance made permanent by P.L. 119-21, as the IRS states in Notice 2026-10.
• Personal car-loan interest: §163(h)(4) as added by P.L. 119-21 §70203; IRS FS-2025-05, Publication 6126, final regulations TD 10054.
• Log, commuting, accountable-plan, and switching rules: IRS Publications 463 and 946; IRC §§274(d), 280F(b).

Keep going: the Schedule C Toolkit sorts the rest of the self-employed return, the §179 & Bonus playbook covers equipment beyond vehicles, and the Return Studio drafts the return these numbers land on. Vehicle-heavy and unsure? That is exactly the question a credentialed pro earns their fee on.