If I Bought a Car, Can I Claim It on My Taxes?

For most people, purchasing a car is a significant expense. Depending on how you use your car, you may be able to deduct some of the cost on your taxes, making this purchase more manageable. In 2026, the IRS allows business owners and individuals to claim certain vehicle-related deductions, but the rules often depend on whether your car is used for business, personal, or mixed purposes.

Use this blog to learn how car tax deductions for businesses really work, including standards for eligibility and depreciation methods. This way, you'll have the clarity you need to move forward in 2026.  

Can You Write Off the Full Cost of a Car?

So, can you claim cars on taxes? Taxpayers generally cannot deduct the full purchase price of a car or other vehicle in a single year. However, the IRS allows businesses and individuals to deduct several vehicle costs, including: 

• Depreciation

• Mileage or operating expenses  

• Certain taxes and fees  

The ability to deduct car expenses is a great tax benefit, and eligibility depends on several factors, including how you use your car.

Tax Deductions for Business Vehicles (2026 Rules)

Business owners and self-employed individuals can write off certain business-related car costs. The IRS allows tax deductions based on the vehicle’s business use percentage each year. Business vehicle deductions you may be eligible for include: 

• Depreciation

• Mileage or actual expenses

• Registration fees

• Parking and tolls

• Interest on business-use auto loans

• The business portion of state and local personal property taxes

You must report business-related vehicle expenses on a federal income tax return. Your return form depends on your business entity type:

• Sole proprietorships and single-member LLCs: Schedule C, Profit or Loss from Business (Sole Proprietorship).

• C corporations: IRS Form 1120, U.S. Corporation Income Tax Return

• S corporations: IRS Form 1120-S, U.S. Income Tax Return for an S Corporation

Do you need help determining which form you should file? 1-800Accountant can help you calculate and report your auto expense deductions. Consult our professionals for accurate, timely tax return compliance.

Vehicle Depreciation & Section 179 (Updated for 2026)

You cannot write off the total price of a business vehicle in the first year. Instead, the IRS allows vehicle depreciation deductions over several years. 

Familiarize yourself with these vehicle depreciation tax deduction basics:

• Eligible vehicles are depreciated over six tax years.

• Depreciable basis = purchase price + sales tax + registration fees.

• The car must be used at least 50% for business purposes to claim depreciation.

Depreciation Methods

Business owners can use one of the following methods to calculate their depreciation expense.Your calculation depends on whether you use the standard mileage rate vs. the actual expense deduction method. 

• Straight-linedepreciation generates equal deductions each year and is mandatory for standard mileage users. 

• Modified Accelerated Cost Recovery System (MACRS) 150% declining balance depreciation generates larger deductions in earlier years and smaller deductions in later years. If you select the actual expense method, you must use MACRS.

• MACRS 200% declining balance depreciation generates the largest deductions in earlier years and the smallest deductions in later years. If you select the actual expense method, you are required to use MACRS.

IRS Publication 463, Travel, Gift, and Car Expenses, includes detailed instructions for calculating the depreciation expense deduction on business vehicles. If you use your company car for personal purposes, apply your business-use percentage to your depreciation deduction.

Depreciation terms and calculations can be complicated, and you don't have to do them alone. 1-800Accountant can take the complexity off your plate and help you determine your depreciation expense.

Section 179 Deduction for Business Vehicles

Section 179 represents an optional one-time first-year deduction on qualifying vehicles and depreciable property. Familiarize yourself with Section 179 rules before claiming this deduction: 

• Vehicle basis is reduced by your Section 179 amount.

• You cannot claim this deduction if you're using the standard mileage method. 

• The Section 179 SUV limit for 2026 is $31,300. 

Claiming the Section 179 deduction can reduce future depreciation deductions and should be planned carefully.

Bonus Depreciation (Special Depreciation Allowance)

In addition to the depreciation expense and Section 179 deductions, the IRS allows businesses to take a special depreciation deduction, commonly known as bonus depreciation.

The rules for bonus depreciation were updated following the passage of the One Big Beautiful Bill Act (OBBB) in 2025. 

• For cars purchased before January 19, 2025, the bonus depreciation rate is 40%. 

• For cars purchased after January 19, 2025, the bonus depreciation rate is 100%. 

Like the Section 179 deduction, special depreciation reduces the vehicle’s depreciable basis.

We recommend consulting our tax professionals for help with complicated depreciation calculations. 

Standard Mileage Rate vs. Actual Expense Method

Standard mileage vs. actual expenses: The IRS allows businesses to choose between standard mileage and actual expense methods for calculating vehicle tax write-offs. 

IRS Tax Topic 510 and IRS Publication 463 include detailed instructions for each approach.

Standard Mileage Rate Method

This method deducts a flat per-mile rate for eligible business miles, which the IRS updates annually. The standard mileage rate for 2026 is 72.5 cents per mile, up from 70 cents in the previous tax year. This method requires straight-line depreciation, which means you cannot claim: 

• Section 179

• Bonus depreciation

• Lease payments

Business Mileage Deduction

In 2026, the IRS implemented the following mileage rates for other purposes: 

• Charities: 14 cents per mile (remains unchanged from 2025)

• Military (moving only) or medical: 20.5 cents per mile (down from 21 cents in 2025)

Actual Expense Method

The actual expense method allows business owners to deduct the vehicle’s business-related operating costs. Eligible business expenses include:

• Gas

• Repairs

• Maintenance

• Insurance

• Lease payments

• Registration fees

The actual expense method requires taxpayers to use MACRS depreciation.

If you use your motor vehicle solely for business purposes and not for personal use, your business can deduct all related operating expenses. However, if you or your employees use the car for personal transportation, you must calculate the vehicle’s business use percentage. 

The tax professionals at 1-800Accountant can help you calculate the correct business-use percentage for vehicle expense deductions.

Actual Expense Method: Other Deductions

Taxpayers who deduct actual expenses rather than the standard mileage deduction can also claim garage rent and license costs. 

Expenses for personal use generally represent nondeductible costs. 1-800Accountant can help you track your expenses and maximize your business tax deductions.

Operational and Vehicle Purchase Costs

Taxpayers can deduct additional business-related vehicle costs using either the standard mileage rate or the actual expense method.

• State and local personal property taxes on business vehicle purchases

• Business-related car loan interest

• Parking fees and tolls incurred during business-related travel

Tax Deductions When Buying a Car for Personal Use

The IRS offers two deduction options on Form 1040, U.S. Individual Income Tax Return:

• Take the standard deduction. 2026 standard deduction amounts vary by filing status.

• Itemize deductions on IRS Form 1040, Schedule A, Itemized Deductions. Calculate and write off medical expenses, taxes paid, charitable contributions, and other deductions.

Taxpayers itemizing deductions on Schedule A can write off certain vehicle costs, such as registration fees, sales taxes, and personal property taxes paid.

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Tax Deductions for Personal-Use Vehicles

Taxpayers can deduct property taxes and vehicle sales taxes on Form 1040, Schedule A. If you itemize, retain your dealership purchase documents with the following information:

• Personal property taxes

• State and local sales taxes

If you plan to use your vehicle for business purposes at least 50% of the time, report the business portion of the taxes on your business tax return. Business owners can deduct up to $40,400 of state and local taxes (SALT) on their personal income tax returns. Note that personal vehicles are not depreciable.

Buying a Car for Mixed Use (Business + Personal)

Purchasing a car for both business and personal use requires additional calculations. Consider the following example for a self-employed entrepreneur working in the rideshare industry. 

The business owner purchased a new vehicle in 2025 and used the car for both business and personal purposes. 

• According to their mileage log, which is essential for this calculation, the business owner traveled 20,000 miles in 2025:

  • 16,000 miles represented rideshare mileage.

  • 4,000 miles were for personal travel and errands.

• 16,000 business miles / 20,000 total miles = 80% business-related vehicle use.

The business owner must apply the business use percentage to all vehicle expenses. For example, the driver would determine their car repair deduction by multiplying the total repair cost by 80%.

Tax Credits for Buying an Electric Vehicle

The IRS offers a tax credit of up to $7,500 for certain electric vehicle purchases made on or before September 30, 2025. This tax break has been phased out due to the passage of the OBBB. The EV credit is subject to: 

• Vehicle eligibility

• Taxable income limits

• Assembly and battery sourcing rules

If you qualify, you can claim this credit for personal or business vehicles. Review the IRS eligibility requirements or talk to your tax advisor to determine whether your plug-in vehicle qualifies. 

Common Mistakes to Avoid

Avoid these common mistakes when claiming your car during the 2026 tax season: 

• Not consistently tracking mileage

• Mixing personal and business vehicle expenses

• Claiming depreciation without meeting the 50% business-use threshold

• Using the wrong deduction method

• Failing to plan Section 179 strategically

Sidestepping these mistakes will make the tax preparation process smoother and more efficient. 

Get Help Claiming Your Vehicle on Your Taxes

Valuable vehicle tax deductions can significantly lower your small business tax bill — but only if they’re calculated correctly. When you trust 1-800Accountant, America's leading virtual accounting firm, with your complex tax work, our tax professionals help you choose the right deduction method, track expenses, and stay compliant year-round.

Talk to a tax expert by scheduling a free 30-minute consultation to learn about specialized tax-deductible services that support compliance throughout the year.