Business vehicles and taxes: buy or lease, deductions and rules
Should you buy or lease the vehicle you use for work? How much can you deduct? What records does the IRS expect? Here is the plain-English guide for 2026 from a CPA firm, with the numbers checked against IRS sources.
Prepared by Prem Tax and Accounting Corp. Last checked against official sources on October 20, 2026.
Start here: five questions
Is it a business vehicle?
Only the business share of the use is deductible, and commuting never counts. See business use and records.
Buy or lease?
The tax results are different: caps on depreciation for light vehicles you buy, a small inclusion amount for expensive vehicles you lease. See buy or lease.
Mileage rate or actual costs?
The first-year choice can lock you in. See mileage rate or actual costs.
How much depreciation?
Light vehicles have yearly caps. Heavier vehicles can be written off much faster. See depreciation and Section 179.
What must we keep and file?
A mileage log, the purchase or lease papers, and sometimes a form with the return. See the compliance checklist.
2026 numbers at a glance
The IRS raised the mileage rate in the middle of 2026. Use 72.5 cents for business miles driven from January 1 to June 30 and 76 cents for miles driven from July 1 to December 31.
The guide, page by page
Buy or lease
How each is deducted, side by side, with a worked example.
Read →Business use and records
What counts, what is commuting, the 50% line and the mileage log.
Read →Mileage rate or actual costs
The 2026 rates, the first-year rules and which method tends to win.
Read →Depreciation and Section 179
Yearly caps for light vehicles, 100% bonus for heavy ones, and the recapture rules.
Read →Leasing and the inclusion amount
What you can deduct on a lease and the 2026 inclusion table.
Read →Compliance checklist
Records, forms, company cars, heavy vehicles and Illinois.
Read →Who this guide is for
- Self-employed people and single-member LLCs who use a car, van or truck in the business (Schedule C).
- S corporation, C corporation and partnership owners deciding who should own or lease the vehicle.
- Employers who give employees a company vehicle or reimburse mileage.
- Employees who drive their own car for work: unreimbursed employee driving is generally not deductible on the federal return, so ask about an accountable plan.
Get answers specific to your situation
This guide gives general information. Your best choice depends on the vehicle, your business use, your income, your entity type and your plans.
- Our retainer clients can call us for specific information about their own vehicles, mileage records and tax return.
- Small business owners should consider becoming our retainer client, to get information that is specific to their own tax situation, ideally before they buy or lease.
Common questions
Can I deduct my car if I only use it partly for business?
Yes, but only the business share. If 60% of your miles are for business, you can deduct 60% of the costs, or use the mileage rate on the business miles. You must be able to show the miles with a log.
Is driving to work deductible?
No. Driving between your home and your regular place of work is commuting, and it is never deductible. Driving from your regular workplace to a client, or from a qualifying home office to another work location, is business use.
Is it better to buy or lease a vehicle for my business?
It depends on the vehicle's weight, your business use, how many miles you drive, how long you keep it and your cash flow. Taxes change the numbers: a heavy vehicle may qualify for a large first-year deduction when bought, while a lease spreads the deduction over the payments. See our buy or lease page.
What records do I need?
A log of your business trips (date, miles, place and purpose), the total miles for the year, and the purchase or lease papers. Receipts too, if you use actual costs.
Can I get advice for my own situation?
Our retainer clients can call us for information specific to their own vehicles and tax situation. If you own a small business, consider becoming a retainer client so that the answers are specific to you.
Official sources
- IRS: Standard mileage rates
- IRS Publication 463: Travel, gift, and car expenses
- IRS Rev. Proc. 2026-15: 2026 depreciation caps and lease inclusion table
- IRS Rev. Proc. 2025-32: 2026 inflation adjustments (Section 179)
Let's talk about your taxes, your business, your plans.
Tell us what you need and we will get back to you quickly. There is no pressure: just a friendly conversation and a clear next step.
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