You may deduct its entire cost of ownership and operation for business purposes if you meet the right conditions. However, if you use the car for both business and personal purposes, you may deduct only the cost of its business use.
You can generally figure the amount of your auto write-off expense by using one of two methods: the standard mileage rate method or the actual expense method. If you qualify to use both methods, you may want to figure your deduction both ways before choosing a method to see which one gives you a larger deduction.
Standard Mileage Rate - The standard mileage rate for the cost of operating your car for business for the 2024 tax year is 65.5 cents per mile. To use the standard mileage rate, you must own or lease the car and:
You must not operate five or more cars at the same time, as in a fleet operation,
You must not have claimed a depreciation deduction for the car using any method other than straight-line,
You must not have claimed a Section 179 deduction on the car,
You must not have claimed the special depreciation allowance on the car, and
You must not have claimed actual expenses after 1997 for a car you lease.
To use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Then, in later years, you can choose to use the standard mileage rate or actual expenses. For a car you lease, you must use the standard mileage rate method for the entire lease period (including renewals) if you choose the standard mileage rate.
Actual Expenses - To use the actual expense method, you must determine what it actually costs to operate the car for the portion of the overall use of the car that's business use. Include gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation (or lease payments) attributable to the portion of the total miles driven that are business miles.
Note: Other car expenses for parking fees and tolls attributable to business use are separately deductible, whether you use the standard mileage rate or actual expenses.
Auto write-offs: How to depreciate
Generally, the Modified Accelerated Cost Recovery System (MACRS) is the only depreciation method that can be used by car owners to depreciate any car placed in service after 1986. However, if you used the standard mileage rate in the year you place the car in service and change to the actual expense method in a later year and before your car is fully depreciated, you must use straight-line depreciation over the estimated remaining useful life of the car. There are limits on how much depreciation you can deduct speak with your tax professional on the details.
The law requires that you substantiate your expenses by adequate records or by sufficient evidence to support your own statement. Audits often go wrong when tax clients fail to keep accurate records, remember "if you can't prove it you will lose it!"