Automobile Expenses: What and How to Deduct?

Automobile Expenses: What and How to Deduct?

If you use a vehicle in your business, either fully or partially, you are entitled to deduct automobile expenses. The IRS allows two methods for this deduction:

     1. Standard Mileage Rate Method

With the standard method, it’s simple: the number of miles you drove for business purposes is multiplied by the rate per mile. This rate is set to 70 cents per mile for 2025. This rate is intended to cover expenses such as: fuel, repairs and maintenance, insurance, loan or lease payments, and depreciation. Separately, you can still deduct tolls, parking fees, and car washes. This method is best suited for those who use their vehicle for both business and personal purposes.

     2. Actual Expenses Method

With this method, you track all actual vehicle costs:

• Fuel

• Repairs and maintenance

• Insurance

• Loan payments (only the interest is deductible) or lease payments

• Vehicle depreciation

• Registration and license fees

Attention! The standard method can only be used for passenger vehicles.

The choice of which accounting method is better for your business is up to you. However, you are generally required to use the chosen method for the entire life of your vehicle.