Updated for tax year 2024.
If you frequently drive your car for business purposes as a self-employed individual, you know how car expenses can quickly add up. And it’s not just the cost of gas — every time you drive your car, you use oil, weaken your brake pads, clog up your air filter and wear down your tires — the list goes on and on. All this wear and tear on your vehicle for business purposes ultimately requires more servicing, plus your car depreciates in value. You may even pay more for car insurance when you drive your car more miles.
Fortunately, there is a silver lining. When it comes time to file your taxes, your car expenses cantranslate to tax savings if you can deduct them as a business expense. Here’s how to make sure you get the tax deductions you deserve.
How to write off car expenses and mileage deductions on your income tax return
1. Understand the standard mileage rate vs. actual expenses.
The IRS allows taxpayers to deduct their vehicle expenses in one of two ways:
- Actual expenses method: Using this method, you must track all your car expenses — including gas, oil, repairs, insurance, registration fees, lease payments, and depreciation — and deduct the portion of your total car expenses that apply to business miles.
- Standard mileage rate method: Using this method, you simply deduct a flat rate for every business mile you drive, which is called the standard mileage deduction. In 2024, the standard mileage rate is 67 cents per mile for business miles.
You may want to calculate mileage for taxes both ways to see which method gives you the biggest standard mileage deduction.
Note: You may not be able to use the standard mileage deduction for claiming mileage in all cases. For example, if you use actual expenses the first year you own a car, you must use actual expenses for as long as you own the car. If you use the standard mileage rate the first year, you can switch back and forth between actual expenses and the standard mileage rate in later years.
2. Keep records of your deductible miles and total mileage.
To take a deduction for business mileage, you must show that you kept records of business miles driven. This is easy to do with your odometer and a small recordkeeping notebook you keep in your car or through an app on your phone. You can also reconstruct miles driven from a mileage log book. No matter which method you choose, you will need to know your total miles driven for the year for business use.
Remember, you can only count business mileage on taxes, not commuting miles or personal use miles. For example, miles driven back and forth to your regular office don’t count. But if you drive for business purposes, such as visiting a client’s office, temporary work location, or an office supply store, you can count those business drives toward the IRS mileage deduction.
3. Enter business mileage or actual car expenses with your business tax form.
If you have a sole proprietorship, enter business mileage and other vehicle expense information with the Schedule C tax form for that business. If you have more than one business, or if you and your spouse are both self-employed small business owners, freelancers, or rideshare drivers, be sure to enter business mileage and expenses with the correct business.
4. Parking fees and tolls are also deductible.
Don’t forget to keep track of any toll and parking receipts. You can deduct these expenses for business miles in addition to other actual expenses or the standard mileage rate.
5. Let TaxAct do the hard work for you.
The IRS requires you to answer several questions to determine if you qualify for a vehicle expense deduction and if you can use the standard mileage deduction.
For the actual expenses method, you need to calculate the amount of depreciation for your car each year. If you use TaxAct® to file your taxes, you can simply answer a few questions and let our tax preparation software determine if you qualify for the mileage tax deduction. Our program also calculates your depreciation deduction for you, as well as the actual expenses versus the standard mileage rate deduction. It will use the method that results in the best deduction amount for you.
Want to estimate your mileage reimbursement for tax year 2024? Check out our mileage reimbursement calculator.