Schedule C Car and Truck Expenses: Mileage, Actual Costs, Depreciation

Sole proprietors and independent contractors deduct vehicle costs as Schedule C car and truck expenses, and for many small businesses it is one of the largest write-offs on the return.¹ You have two ways to calculate the deduction: the standard mileage rate, which is 72.5 cents per mile in 2026, or the actual expense method, where you total every operating cost and multiply by your business-use percentage.² The choice you make in the first year the vehicle is available for business use locks you into certain rules for as long as you own it.

What Counts as a Business Mile

Only miles driven for the specific purpose of conducting business are deductible. Trips between your home and a regular place of work are commuting miles, and they are never deductible, even if you take business calls on the way or haul tools in the back seat.³ Personal driving is out too.

Every expense you claim must be “ordinary and necessary” for your trade or business.⁴ In practice that means the cost would be common and accepted among others in your line of work. A plumber driving between job sites clearly qualifies; a software developer claiming 30,000 business miles a year from a home office would face harder questions.

How a Home Office Changes the Math

If you have a qualifying home office that serves as your principal place of business, trips from home to client sites or other work locations become deductible business miles rather than nondeductible commuting.³ This is one of the most valuable and underused rules for sole proprietors. A freelance consultant who drives from home to meet clients at their offices can deduct every one of those round-trip miles if the home office qualifies. Without a home office, those same trips would be commuting.

The Standard Mileage Rate

The standard mileage rate is the simpler approach. You multiply documented business miles by the IRS rate for the year. At 72.5 cents per mile in 2026, 10,000 business miles produce a $7,250 deduction.²

The rate covers gas, oil, repairs, maintenance, insurance, and depreciation, so you cannot deduct those separately. Business-related parking fees and tolls, however, are deductible on top of the mileage rate.⁵

The standard mileage rate is unavailable if you use five or more vehicles simultaneously in your business, and it is unavailable if you previously claimed MACRS depreciation, Section 179 expensing, or bonus depreciation on the vehicle.⁶

The Actual Expense Method

The actual expense method requires tracking every dollar spent on the vehicle. It is more paperwork, but it often produces a larger deduction for vehicles that are expensive to run. Your business-use percentage is total business miles divided by total miles driven for the year. Drive 15,000 total miles with 12,000 for business, and your business-use percentage is 80%. Only that 80% of your operating costs is deductible.

Deductible operating costs include:

Fuel and oil, including charging costs for electric vehicles
Repairs and maintenance, from oil changes to transmission work
Insurance premiums
Registration fees and licensing
Lease payments if you lease rather than own
Garage rent for a separate parking space
The business portion of interest on a vehicle loan⁷

Personal property taxes assessed on the vehicle based on its value are deductible on Schedule C, Line 23, but only the business-use portion, and you cannot also claim that same business portion on Schedule A.⁷

Total these expenses for the year, multiply by your business-use percentage, then add depreciation, which is calculated separately.

Depreciation, Section 179, and Bonus Depreciation

When you use the actual expense method on a vehicle you own, you recover the purchase price through depreciation. Under the Modified Accelerated Cost Recovery System, vehicles fall into the five-year property class, and only the business-use portion of the cost is depreciable.⁸

Section 179 lets you deduct the full business-use cost of a qualifying vehicle in the year you place it in service.⁹ For 2026 the general Section 179 limit is $2,560,000, but passenger automobiles face much lower caps. Business use must exceed 50% to qualify.

Bonus depreciation adds a first-year deduction on top of regular MACRS. Under the original Tax Cuts and Jobs Act phase-down, bonus depreciation was scheduled to fall to 20% for property placed in service in 2026. Subsequent legislation restored 100% bonus depreciation, making the full cost of qualifying new and used vehicles eligible for immediate write-off, subject to the annual dollar caps below.¹⁰

Luxury Auto Depreciation Caps

Regardless of how aggressively you want to depreciate a passenger vehicle, annual dollar limits cap the deduction. These “luxury auto limits” apply to any four-wheeled vehicle made primarily for use on public roads with a gross vehicle weight of 6,000 pounds or less. For passenger automobiles placed in service in 2026:¹⁰

With bonus depreciation:

First year: $20,300
Second year: $19,800
Third year: $11,900
Each year after: $7,160

Without bonus depreciation:

First year: $12,300
Second year: $19,800
Third year: $11,900
Each year after: $7,160

The $8,000 first-year gap is the entire practical effect of bonus depreciation for most passenger cars. After year one, the caps match.

Heavy Vehicles Over 6,000 Pounds

Trucks, vans, and SUVs with a gross vehicle weight rating above 6,000 pounds escape the passenger automobile caps, which dramatically expands the first-year deduction.³ The rules split into two tiers:

SUVs rated 6,001 to 14,000 lbs GVWR: Section 179 is capped at $32,000 for 2026, but bonus depreciation can cover the rest of the cost with no luxury cap.
Trucks and vans over 6,000 lbs with a cargo bed at least six feet long, or other qualifying non-personal-use configurations: eligible for the full Section 179 deduction up to $2,560,000, plus bonus depreciation, with no SUV-specific limit.¹¹

Business use must exceed 50% for any vehicle to qualify for Section 179 or bonus depreciation, and that threshold is not a one-time test. If business use later drops to 50% or below, you may have to recapture a portion of the accelerated depreciation as ordinary income.

Leased Vehicles

If you lease, you deduct the business-use percentage of your lease payments under the actual expense method, or you use the standard mileage rate for the entire lease term, including renewals.²

Under the actual expense method, the IRS reduces your lease deduction by an annual “lease inclusion amount” if the vehicle’s fair market value exceeds a threshold when the lease begins. The rule prevents lessees from sidestepping the depreciation caps that apply to owners.¹⁰ For leases beginning in 2026, the inclusion amount kicks in when the vehicle’s fair market value exceeds $62,000. The higher the value, the larger the inclusion. Table 3 in Revenue Procedure 2026-15 lists the dollar amounts by value range.

Heavy vehicles with a gross vehicle weight rating above 6,000 pounds are generally exempt from the lease inclusion rule.

The First-Year Election That Locks You In

If you own the vehicle, you must choose the standard mileage rate in the first year the car is available for business use. Choose the actual expense method that first year, and you lose the option to ever use the standard mileage rate for that vehicle.³ It is irreversible.

Flexibility runs one direction. Start with the standard mileage rate, and you can switch to actual expenses later. But once you have used MACRS depreciation under the actual expense method, the standard mileage rate is permanently off the table for that car. If you do switch from standard mileage to actual expenses, you cannot use MACRS; you are limited to straight-line depreciation over the vehicle’s remaining useful life.³

Reporting on Schedule C and Form 4562

Vehicle operating expenses go on Schedule C, Part II, Line 9.⁷ If you used the actual expense method and claimed depreciation or Section 179 expensing, that portion goes on Line 13, and you must file Form 4562 with your return.¹² Lease payments are reported on Line 20a.

Part IV of Schedule C asks whether you have evidence to support the vehicle deduction and whether that evidence is written. Answering “No” to the written-evidence question invites scrutiny.

Net profit or loss from Schedule C, Line 31, flows to Schedule 1 (Form 1040), Line 3, and into your adjusted gross income.¹³ It also feeds Schedule SE for self-employment tax, so a legitimate vehicle deduction reduces both income tax and self-employment tax.

The Mileage Log That Keeps the Deduction Alive

A contemporaneous mileage log is the single most important piece of documentation. “Contemporaneous” means you record each trip around the time it happens, not in a weekend marathon before your tax appointment. Each entry needs the date, destination, business purpose, and miles driven. Record the odometer at the start and end of the tax year so the IRS can verify total mileage.¹⁴

Under the actual expense method, keep receipts for every cost in addition to the log. Without a log, the IRS can disallow your entire vehicle deduction. A phone app that tracks trips by GPS is the easiest way to build a defensible record.

Keep the records for at least three years from the date you filed the return.¹⁵ Vehicles are depreciable property, so keep the purchase records, mileage logs, and depreciation schedules until the statute of limitations expires for the year you dispose of the vehicle. Buy a truck in 2026 and sell it in 2032, and you need those records through at least 2035.

1
Internal Revenue Service. About Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship)
2
Internal Revenue Service. IRS Sets 2026 Business Standard Mileage Rate at 72.5 Cents per Mile
3
Internal Revenue Service. Publication 463 (2025), Travel, Gift, and Car Expenses
4
Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses
5
Internal Revenue Service. Topic No. 510, Business Use of Car
6
Internal Revenue Service. Revenue Procedure 2019-46
7
Internal Revenue Service. 2025 Instructions for Schedule C (Form 1040)
8
Internal Revenue Service. Depreciation Frequently Asked Questions
9
Office of the Law Revision Counsel. 26 USC 179 – Election to Expense Certain Depreciable Business Assets
10
Internal Revenue Service. Revenue Procedure 2026-15
11
Internal Revenue Service. Instructions for Form 4562 (2025)
12
Internal Revenue Service. Form 4562 – Depreciation and Amortization (2025)
13
Internal Revenue Service. Instructions for Schedule C (Form 1040) (2025) – Section: Line 31
14
Internal Revenue Service. Standard Mileage Rates
15
Internal Revenue Service. How Long Should I Keep Records