The United States federal tax code is complicated and confusing. If you drive a vehicle for work purposes, you may be able to deduct some of those costs. Here's your guide to work vehicle tax deductions.

What counts as a business vehicle?

A business vehicle can be a corporate vehicle or a personal vehicle. A corporate vehicle is owned or leased by the company you work for. A personal vehicle used for work purposes also counts as a business vehicle. The key distinction for tax deductions is whether you are an employee or self-employed.

A corporate vehicle, since it is owned or leased by the company, can only bring tax deductions to the company. The employer can write off corporate vehicle costs because these count as business expenses.

Personal vehicle costs may be tax deductible if a self-employed individual uses the vehicle for work. Employees using a personal vehicle for work cannot deduct any car-related costs.

Tax deductible vehicle expenses

For a business owner, determining tax deductible vehicle expenses depends on the type of expense. The vehicle must be used for business purposes in order to write off related expenses. 

There are two methods of deducting vehicle expenses if you are self-employed:

• Mileage – Multiply the IRS standard mileage rate by all business mileage.
• Actual Expense – Deduct the business portion of each expense, such as insurance, gas, registration, depreciation, etc.

Tax deductions with the IRS mileage rate

The simplest way to deduct vehicle costs is to use the IRS standard mileage rate. For tax year 2024 the IRS mileage rate for business is 67 cents per mile. Self-employed individuals may calculate their tax deduction by applying that rate to their total business mileage.

For example, if Susan drove 13,000 miles for business in 2024, then her deduction would be $8,710. In case of an audit, she should keep track of her trips on a log or spreadsheet. The log should list dates, locations, purpose, and miles traveled.

Even better, she could use an automated mileage tracking app on her phone. This kind of app can track and store business mileage for each trip.

Tax deductions using Actual Expenses

What car expenses can you deduct on your taxes? The following list includes several categories:

• Fuel
• Maintenance (oil changes, etc.)
• Depreciation (if the business owns the vehicle, see IRS Section 179)
• Auto insurance
• Property taxes, registration, license

If you use a personal vehicle for work, calculate each expense by business percentage. Let's say Joe paid $2,400 in car insurance in 2024 and used his vehicle 70% of time for work. His deduction for insurance would be $1,680.

Mileage deductions vs. mileage reimbursements

Employers and employees should understand the distinction between deducting and reimbursing mileage. The same standard mileage rate is used for both purposes. The IRS business mileage rate calculates the tax deductible value of a vehicle used for business.

IRS mileage rate for deductions

First, remember that only self-employed individuals and businesses can claim mileage on tax returns. They may then perform the following steps:

• Keep track of business mileage for every trip
• Record the mileage on an IRS-approved log, or use a mileage app
• Multiply the annual miles driven for business by the standard rate (for 2024 it was 67 cents per mile)
• Enter that dollar amount on Schedule C of the tax return

IRS mileage rate for reimbursements

Because employees cannot claim mileage on taxes, it is fair for businesses to reimburse them. Many businesses choose to reimburse at the IRS tax deduction mileage rate. For 2025 that rate is 70 cents per mile, so going forward businesses should use that rate.

In many industries, some form of mileage reimbursement is expected by prospective employees. Businesses may offer reimbursements to attract and retain good employees. But there are alternatives to the standard business rate.

Tax free FAVR mileage rates for business

Reimbursing mileage with the IRS standard rate comes with some downsides. It tends to over- and under-reimburse certain types of drivers. It can also get expensive for businesses with a lot of high-mileage drivers. An alternative is another IRS-approved federal rate of reimbursement.

This other tax-free federal rate is called fixed and variable rate, or FAVR. This reimbursement approach separates out different kinds of costs and reimburses them using different rates. All rates derive from localized vehicle costs. This approach eliminates over- and under-reimbursements.

Tax deduction FAQs

Is car mileage tax deductible?

A self-employed individual may deduct business-related mileage. A business may deduct mileage for a company vehicle. A business may deduct mileage reimbursements to employees using personal vehicles for work. But an employed individual cannot deduct mileage for trips on behalf of the company.

If my company keeps track of my travel, can I still deduct mileage?

If you are an employee, you cannot deduct mileage driven for your employer. Your employer can keep track of your mileage and deduct that mileage if the employer pays you a mileage reimbursement. Only self-employed contractors can deduct business mileage on individual tax returns.

Are parking expenses tax deductible?

Parking fees for work may be tax deductible if they are a necessary part of your job. But you must be a self-employed worker to deduct these fees on Schedule C of your taxes. For example, if you pay a parking fee at an airport while on a business trip. Or if you meet with a client and have to pay for parking. Parking tickets and fines are not deductible.

Are tolls tax deductible?

Once again, self-employed individuals may deduct tolls as a business expense, but not employees. Employees must instead seek reimbursement of tolls from their employers. Examples: Uber and Lyft drivers, because they are contractors, may deduct tolls they incur. Amazon delivery drivers, if self-employed, may do so as well.

Are commuting costs tax deductible?

In general, commuting costs are not tax deductible. But how you determine what counts as a commute is important. If you are self-employed and work from home, then you may deduct costs of travel related to your business. But if you are self-employed and have an office elsewhere, your routine trips to the office cannot be deducted. Only travel from that office to other locations for business purposes are deductible.

Are vehicle leases tax deductible?

If you own a business and lease a vehicle used 100% of the time for business purposes, then you may deduct lease payments. However, the IRS makes it clear that if you write off the lease payments, you cannot write off mileage. You may deduct the lease or the mileage using the standard mileage rate, but you cannot deduct both.