Is Buying a Car Tax-Deductible?

Key Points:

• Shoppers can qualify for a tax deduction or tax credit for a vehicle purchase if buying and driving the vehicle for business use.
• A car’s operating costs can be deducted even if you split the use of the car between business and personal driving.
• Since the federal EV tax credit program ended Sept. 30, EVs and plug-in hybrids are no longer eligible for a tax credit, but some shoppers might still be able to claim an EV credit on their 2025 tax return.

Benjamin Franklin astutely noted that the only certainties in this world are death and taxes. If you bought a vehicle last year, you might be curious if a tax deduction can lessen the pain of the latter. Shoppers can qualify for a tax deduction or tax credit for a vehicle purchase if buying and driving the vehicle for business use. However, since the federal EV tax credit program ended Sept. 30, EVs and plug-in hybrids are no longer eligible for a tax credit.

Related: Leased and Used Electric Vehicles Now Qualify for Federal Tax Credits

You Bought a Car for Business

Key Takeaways:

• A car’s operating costs can be deducted even if you split the use of the car between business and personal driving.
• Keep thorough records of all business-related receipts, mileage logs and other related documents.

According to Mark Steber, chief tax information officer at Jackson Hewitt, you can deduct your vehicle purchase as long as it’s for business use. A vehicle purchase made solely for personal use will not be eligible. “The [vehicle] purchase can be deducted using a limited cost factor, percentage of business use and depreciation,” wrote Steber in an email to Cars.com.

Deducting Operating Costs

A car’s operating costs can be deducted even if you split the use of the car between business and personal driving, but you will need to separate and track the business-related usage. You can deduct the operating costs of using the car for business or charitable pursuits via the standard mileage rate determined by the IRS, which is 70 cents per mile for 2025, or your actual vehicle expenses. Using the standard mileage rate doesn’t demand as much record keeping as the actual vehicle expense method since it only requires you to track the mileage driven for business use and the business purpose for the travel; a vehicle’s depreciation is already factored into this rate.

Alternatively, you can use the actual expense method, which separates out all the costs of owning and driving the vehicle such as depreciation, fuel, oil, tolls, insurance payments, registration fees and repairs. In this case, you will need to keep a detailed log and collect the receipts of all business-related expenses. Once you add up the operating expenses, you’ll multiply the total by the percentage of miles driven for business use.

According to TurboTax, one method may yield a more advantageous tax return one year, while the other may win out the next. You can calculate your operating costs using both methods to decide which one is best, but note that you must use the standard mileage rate method in the first year that you use the vehicle for business if you want to use it in subsequent years.

Tax Deductions for Ride-Share, Delivery Drivers

The growth of the gig economy has enabled more car owners to use their vehicles for personal and business driving. Examples include driving for ride-share companies like Lyft and Uber or part-time delivery services like Amazon Flex. Drivers for these services are usually not direct employees of the company but instead are self-employed independent contractors. This means that the onus falls on the vehicle owner to file for a tax deduction.

Drivers can choose from one of the aforementioned vehicle tax deduction options (standard mileage or actual expenses) and should keep thorough records of all business-related receipts, mileage logs and other related documents. There are a variety of apps available for gig workers that help organize and track expenses, which can be especially helpful during tax season.

You Bought an EV

Key Takeaway:

• Despite the federal tax credit having ended Sept. 30, some shoppers might still be able to claim an EV credit on their 2025 tax return.

While the federal EV tax credit that saved some shoppers up to $7,500 for new EVs and $4,000 credit for used EVs ended Sept. 30, you may still be able to get some cash back if you didn’t already do so at the dealership.

According to H&R Block, buyers who purchased a new or used EV before Sept. 30, 2025, and chose to forgo transferring the EV credit to the dealer to apply it to the sale price could still claim the credit on their 2025 tax return via IRS Form 8936.

To claim the credit for a new EV, individuals and businesses must complete Parts I, II and III of the form and submit it with their 2025 tax return. They must also provide information on the vehicle, including its battery capacity and the date it was placed in service.

For used EVs, individuals and businesses will complete Parts I and IV of Form 8936 and submit it along with their 2025 tax return. As with a new vehicle, information about the vehicle and the sale should also be included; the dealer must also be registered with the IRS to process the credit. If they’re not, your vehicle won’t be eligible for the credit.

One last note: According to H&R Block, you can’t carry the EV tax credit over to the next year’s tax return.

Read More About Electric Vehicles on Cars.com:

• How Can You Save on Your EV Purchase?
• Electric Cars With the Longest Range
• Selling to a Dealer: Taxes and Other Considerations
• Here Are the 11 Cheapest Electric Vehicles You Can Buy
• More Electric Car News

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