Driving your own car for business can be convenient, but it comes with important tax rules. Understanding these rules can save you money and prevent costly mistakes. Here’s what you need to know:
Business vs. Personal Use
- Only business use is deductible. Commuting to and from work is not.
- Deductible trips include visiting clients, traveling between business locations, and picking up supplies for your business.
Two Deduction Methods
- Standard Mileage Rate: For 2025, the IRS rate is 70 cents per mile. For 2026, the IRS rate is 72.5 cents per mile.
- Actual Expense Method
Recordkeeping is Critical
- Maintain a mileage log with date, destination, purpose of trip, and odometer readings.
- Keep receipts for fuel, maintenance, and other expenses.
- Apps like MileIQ or Everlance can simplify tracking.
Depreciation and Section 179
- If you use the car more than 50% for business, you may qualify for accelerated depreciation or a Section 179 deduction.
- Passenger cars have annual depreciation limits; heavier vehicles may allow larger deductions.
- If you later transfer the car into the business or sell it, there may be tax consequences.
Common Mistakes to Avoid
- Mixing personal and business expenses in one account can trigger IRS scrutiny.
- Failing to track mileage accurately.
- Assuming commuting miles are deductible—they’re not.
Bottom Line
Using your personal car for business can offer tax benefits, but only if you follow the rules. Choose the right deduction method, keep meticulous records, and consult a tax professional for complex situations.