CHAPTER 43Deducting Car and Truck Expenses
The costs of buying and operating a car, truck, or van for business are deductible under rules hedged with restrictions. Depreciation deductions for most cars, trucks, and vans are subject to annual ceilings, but for vehicles placed in service in 2021 and used 100% for business, bonus depreciation allows a first-year depreciation limit of $18,200 (43.5). The cost of heavy SUVs used 100% for business that are placed in service in 2021 can be fully deducted in 2021.
To avoid accounting for actual vehicle expenses and depreciation, you may claim an IRS mileage allowance. The allowance for 2021 is 56 cents per mile. Keep a record of business trip mileage.
If you are self-employed, you deduct your vehicle expenses on Schedule C (40.6). Use Form 4562 to compute depreciation if you claim actual operating costs instead of the IRS mileage allowance. If you are an employee, you cannot deduct your unreimbursed vehicle expenses because of the suspension of miscellaneous itemized deductions subject to the 2% of adjusted gross income floor through 2025 (19.2).
If you bought an electric vehicle in 2021 for business and/or personal use, you may be eligible for a tax credit, depending on the manufacturer (25.16).
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