If you just use a car for your personal use, your auto expenses like gas, repairs and oil changes aren't tax deductible. If you're using the car for business purposes, that's a different story: You can generally either deduct based on a standard mileage rate published by the Internal Revenue Service or based on actual costs, including maintenance, fuel, insurance and registration fees. If you're an employee, you generally can't take these deductions after 2017.
Cars for Personal Use
If you're using your car only for your personal use, including your commute to work or school, it's generally not tax deductible.
You might be able to get a federal tax credit if you buy a plug-in electric vehicle. Check with the IRS, your tax preparer or the car manufacturer to see if your vehicle qualifies for such a credit. Some states and local governments also offer incentives for buying electric vehicles as a means to reduce pollution, so if you have such a car you might be able to get such a tax benefit in your jurisdiction.
State Car Tax Deduction
If your state charges car owners an annual property tax, this may be deductible with other state and local taxes on your federal income tax return. Check with your state tax authority and the IRS to make sure whatever tax your state assesses qualifies.
Sales taxes you paid to buy a vehicle are also deductible along with other sales taxes. If your state taxes vehicles at a higher rate than other types of goods, you can only claim the rate you would have paid on general merchandise.
Business Vehicle Tax Deduction
If you use a car exclusively or some of the time for business purposes, you may be able to take a deduction on related expenses, just as you can with other business expenses. You can't claim the cost of driving between your home and your regular place of business, since that's considered part of your regular commute rather than a business expense, but you can deduct other trips such as to buy supplies, attend meetings or visit client sites.
You can generally deduct actual auto expenses, including any necessary repairs and regular maintenance, or take a deduction based on the IRS standard mileage rate. If you do claim actual expenses, you should keep receipts to document what you spend on various costs. If you also use the vehicle for personal use, you should also document what percentage of the time you do so in order to appropriately prorate the expenses.
Whether you claim mileage or actual expenses, you can also separately deduct parking and tolls related to business travel, meetings and similar business purposes.
Understanding The Business Mileage Deduction
If you run your own business and want to deduct vehicle expenses from your taxable income based on miles driven, make sure to document the number of miles you drive for business purposes. You may want to keep a logbook in your car and write down your mileage before and after each business-related drive so you can compute the total at the end of the year.
Each year, the IRS publishes a mileage rate based on gas prices and other factors for that particular year. For 2018, the IRS mileage rate is 54.5 cents per mile. That's up from 53.5 cents per mile as of 2017.
To claim the mileage deduction, you need to own or lease the vehicle in question, and it can't be part of a business fleet of five or more vehicles. You must elect to use the mileage deduction rather than actual expenses the first year you use the vehicle for business purposes or you will not be permitted to use it in the future. Other restrictions also apply, so check the IRS restrictions before taking the mileage deduction.
Understanding Employee Mileage Deductions
Through 2017, you are able to deduct employee expenses, including mileage or actual expenses for use of your personal vehicle while working, though you can only claim the amount that exceeds 2 percent of your IRS adjusted gross income for the year. You're only able to deduct expenses to the extent that they aren't reimbursed by your employer. You also must itemize your tax deductions to claim such expenses, so it's generally not worth doing so if your standard deduction would exceed your itemized deductions.
As of 2018, these types of miscellaneous itemized deductions are no longer available.
Vehicle Use for Medical Purposes
You can generally deduct medical expenses that exceed 7.5 percent of your adjusted gross income. You can include the cost of transportation to medical visits as a medical expense. This includes transportation costs for a parent of a child who can't travel alone, a nurse necessary to accompany someone who can't travel alone and transportation costs for someone going to see a dependent with a mental illness where visits are recommended as part of the patient's care.
If you're driving, you can either claim actual expenses including gas and oil or claim a standard mileage rate set by the IRS. The rate is 18 cents per mile in 2018, up from 17 cents per mile in 2017.
No matter which you claim, you can't claim general vehicle expenses including licensing costs, insurance, depreciation or maintenance and repairs. Either way, you can claim the costs of tolls and parking on top of your mileage or vehicle expenses.
Make sure to keep receipts or a mileage log if you plan to claim driving related to medical care.
Taking Deductions for Charitable Use
If you use your car while doing work for a charity, you can take a deduction for related expenses as a charitable contribution, essentially adding it to any goods or money you donate to charity that year. Note that you can only take the charitable contribution deduction if you itemize your deductions, so it will not be worthwhile if your total itemized deductions come out to less than your standard deduction.
You can either deduct expenses like gas and oil used for your charitable work or use a standard federal mileage rate. The rate is fixed by law at 14 cents per mile, and you're not allowed to deduct repair and maintenance costs, the cost of tires, insurance costs or the costs of keeping the car licensed or registered. As with business expenses, you can deduct parking fees and tolls whether you claim actual expenses or mileage.
You can't take a charitable contribution deduction for the value of your time when you volunteer, whether you're driving or doing any other sort of work.
Track your expenses or mileage if you're planning to claim a charitable contribution related to your driving for a nonprofit.
Tax Law Changes for 2018
As of 2018, you can no longer claim miscellaneous itemized deductions, including those for employee use of a personal vehicle for work.
Additionally, standard deductions are rising for all classes of taxpayers. They'll be $12,000 for single taxpayers, $18,000 for people filing as head of household and $24,000 for married couples filing jointly. That's up from 2017, when standard deductions were $6,350 for single filers, $12,700 for married couples filing jointly and $9,350 for those filing as head of household.
These higher rates will likely mean some people won't find it worthwhile to itemize their deductions and claim charitable contributions, including those related to transportation.
- Department of Energy: Electric Vehicles: Tax Credits and Other Incentives
- MarketWatch: Use Your Car For Your Small Business?
- IRS: Topic Number 503 - Deductible Taxes
- IRS: Standard Mileage Rates for 2018 Up from Rates for 2017
- IRS: Publication 526 (2017), Charitable Contributions
- IRS: Publication 17
- IRS: Publication 502 (2017), Medical and Dental Expenses
- Forbes: New: IRS Announces 2018 Tax Rates, Standard Deductions, Exemption Amounts And More
- Internal Revenue Service. "IRS issues standard mileage rates for 2020." Accessed Feb. 3, 2020.
- Internal Revenue Service. "Standard Mileage Rates." Accessed Feb. 3, 2020.
- Cision PR Newswire. "Runzheimer Data Sets 2017 IRS Business Mileage Rate at 53.5 Cents." Accessed Feb. 3, 2020.
- U.S. Government Publishing Office. "H. R. 606." Accessed May 1, 2020.
- Internal Revenue Service. "Publication 463 Travel, Gift, and Car Expenses," Pages 13-15. Accessed Feb. 3, 2020.
- Internal Revenue Service. "Publication 526 Charitable Contributions," Page 6. Accessed Feb. 3, 2020.
Steven Melendez is an independent journalist with a background in technology and business. He has written for a variety of business publications including Fast Company, the Wall Street Journal, Innovation Leader and Ad Age. He was awarded the Knight Foundation scholarship to Northwestern University's Medill School of Journalism.