If you use your car for business, you can calculate your tax deduction in two ways: (1) using the IRS standard mileage allowance rates or (2) based on a percentage of your actual car expenses.

Standard Mileage Allowance Rates

• 2025: 70.0 cents per mile

• 2024: 67.0 cents per mile

• 2023: 65.5 cents per mile

Calculating your tax deduction using the standard mileage allowance rates is really straightforward. Just multiply your number of business-related miles by the rate shown above, then add your parking costs and bridge tolls.

Actual Expense Method

Alternatively, you can keep track of your actual expenses, including gas, repairs, insurance, and registration. Add depreciation to that total, then multiply the whole amount by your percentage of business use.

Your business use percentage is calculated by dividing your business miles by your total miles for the year. For example: If you drive 12,000 miles and 6,000 of those miles are for business, your business percentage is 50%.

Depreciation amounts depend on several factors: the value of the vehicle, the type of vehicle, when it was first put into service, and whether the vehicle is used more or less than 50% for business.

Choosing Your Method

You can use whichever of these two methods gives you the larger tax deduction. However, if you use the mileage allowance rates for the first year, you can't claim depreciation in the following years.

Either way, you can also deduct the business percentage of the interest you pay on a car loan.

Special Situations

There are special rules for businesses that:

• Rent out their vehicles

• Have more than 5 vehicles

• Have modified vehicles so they're no longer passenger vehicles, such as by removing seats or adding shelving to vans.

There are additional special rules, such as lease inclusion amounts, so before you spend a significant amount of money buying or leasing a car for your business, or if you have questions about your business tax deduction for using your car, you should consult an experienced CPA tax accountant.