Can I Deduct My Car Expenses If I Use It for Both Business and Personal Purposes?

Many small business owners face the same question each year: “How do I handle auto expenses when my vehicle serves both personal and business needs?” The answer can mean thousands of dollars in tax savings if you plan correctly — or a costly IRS adjustment if you don’t.

At Business Advisory and Accounting Partners, we believe your business is your most important investment. Any CPA firm can record history. Our firm will help you build a future. That means we don’t just check the box on whether your mileage log exists — we help you use that data to improve profitability, cash flow, and long-term planning.

How do IRS rules treat auto expenses for business vs. personal use?

The IRS vehicle deduction rules are very clear: only the portion of your driving tied to business activity is deductible. This means personal errands, school drop-offs, or family vacations are not deductible, even if they happen in the same car you use for work.

For small business auto deductions, you have two options:

Standard mileage rate deduction – Multiply your business miles by the IRS standard mileage rate.

Actual expense method deduction – Deduct a percentage of actual costs (gas, insurance, depreciation, maintenance) equal to your business-use percentage.

Both methods require careful recordkeeping — especially if the vehicle is mixed-use.

What counts as business use of a vehicle?

Deductible car expenses for business include:

• Driving to client meetings or job sites
• Traveling to networking events or conferences
• Picking up supplies or business-related materials
• Trips related to rental property management

What doesn’t count?

Your commute from home to your regular office. That’s considered personal use, even if you run a business.

How do I decide between mileage vs. actual expense deductions?

This decision often depends on your vehicle type and usage.

• Standard mileage works best for high-mileage, fuel-efficient cars.
• Actual expense methods can yield bigger savings for owners of trucks, SUVs, or vehicles with higher insurance, maintenance, or depreciation costs.

For example: imagine a dental practice owner who drives an SUV used for both business and family purposes. By carefully tracking trips and applying the actual expense method, they might find an additional $6,800 in deductions compared with using the mileage method.

That extra savings could be reinvested into new equipment or hiring staff — a proactive, advisor-driven decision rather than just an accounting calculation.

Recordkeeping Requirements for Mixed-Use Vehicles: What the IRS Requires?

The IRS requires that records be kept at the time of the expense. This means you need a mileage log that shows:

• Date of the trip
• Starting point and destination
• Business purpose
• Miles driven

Apps like MileIQ or QuickBooks Time make tracking vehicle expenses easy.

For example, if your vehicle is driven 10,000 miles in total and 6,500 of those are for business, you can deduct 65% of your gas, insurance, and repair costs using the actual expense method.

Without a proper mileage log, the IRS may disallow your deduction. Even a self-made spreadsheet only works if it’s kept up consistently and accurately.

What’s the difference between an accountant and an advisor?

• Accountant mindset: “Here’s your deduction based on what you gave me.”
• Advisor mindset (our approach): “Here’s how to optimize your car expenses this year, improve long-term tax efficiency, and reinvest those savings into growth.”

The key difference is passive reporting versus proactive planning—and proactive planning always wins.

Bottom line: If your vehicle is used for both business and personal purposes, you can deduct expenses—but only with precise records and a smart strategy. An advisor doesn’t just keep you compliant; they help turn your decisions into wealth-building opportunities.

Want this tailored to your business? Book a call today.

Frequently Asked Questions