Business Use of a Car: How to Maximize Vehicle Deductions Without Triggering Red Flags

For many business owners, creators, and professionals, a vehicle is not just transportation—it’s a core business tool. Whether you’re driving to film content, visiting patients, meeting suppliers, or managing an online operation, understanding how to properly deduct vehicle expenses can result in thousands of dollars in legitimate tax savings.

At Velin & Associates, Inc., we regularly help clients navigate the rules around business vehicle deductions, choose the right deduction method, and—most importantly—document their usage correctly to withstand IRS and California Franchise Tax Board scrutiny.

This article explains how business vehicle deductions work, the two main deduction methods, and practical examples of how our clients use these rules in real life.

When Is a Vehicle Considered “Business Use”?

A vehicle qualifies for business use when it’s used for activities directly related to earning income. This includes:

• Traveling to meet clients or patients
• Driving to a filming location or production site
• Going to the post office, bank, or suppliers
• Transporting tools, equipment, or inventory

If the vehicle is used 100% for business, you may deduct the full cost of ownership and operation (subject to limits). However, most taxpayers use their vehicles for both business and personal purposes.

When a car is used for mixed purposes, only the business-use portion is deductible. This makes accurate mileage tracking essential.

The Two Ways to Deduct Business Vehicle Expenses

Business owners generally calculate their car deduction using one of two methods:

1. Standard Mileage Rate
2. Actual Expense Method

At Velin & Associates, we often calculate both methods for our clients to determine which produces the larger deduction—while staying compliant.

Method 1: Standard Mileage Rate (Simple and Popular)

The standard mileage rate allows you to deduct a fixed amount per business mile driven during the year. This method is often ideal for:

• Freelancers and creators
• Consultants and professionals
• Online business owners with lighter vehicles

Requirements to Use the Standard Mileage Method

You must meet all of the following:

• You do not operate five or more vehicles at the same time (not a fleet)
• You did not claim Section 179 on the vehicle
• You did not claim bonus depreciation
• You did not use accelerated depreciation methods
• If leased, you must use this method for the entire lease term

Once you choose the standard mileage method in the first year the vehicle is placed into service, you retain flexibility in future years (unless the vehicle is leased).

Example of a scenario we often see with YouTubers and filmmakers:

One of our Los Angeles-based filmmakers drives to studios, rental houses, and filming locations across Southern California. In 2025, they logged approximately 14,000 business miles.

Using the standard mileage rate, their deduction exceeded what they would have received using actual expenses—without needing to track gas, insurance, or repairs.

For creators, this method often provides a strong deduction with minimal administrative burden.

Method 2: Actual Expense Method (Best for High-Cost Vehicles)

The actual expense method deducts the business portion of all vehicle-related costs, including:

• Gas and oil
• Repairs and maintenance
• Tires
• Insurance
• Registration and licenses
• Lease payments or depreciation

If a vehicle is used 60% for business, then 60% of total expenses are deductible.

Common Scenario for Doctors:

A physician operating a private medical practice uses a luxury SUV primarily for business—traveling between hospitals, clinics, and administrative offices. Because the vehicle has high insurance, lease payments, and maintenance costs, the actual expense method resulted in a larger deduction than mileage.

For doctors, dentists, and high net worth individuals, this method often works better—but only when documentation is done correctly.

Depreciation: What Business Owners Need to Know

Vehicles placed into service for business are depreciated under the Modified Accelerated Cost Recovery System (MACRS), subject to annual limits.

Important planning point:

• If you start with the standard mileage method and later switch to actual expenses, depreciation must use straight-line depreciation over the remaining life of the vehicle.
• Luxury auto limits apply, which can significantly restrict deductions on higher-priced vehicles.

This is where tax planning matters. Choosing the wrong method in year one can permanently limit deductions later.

Parking Fees and Tolls: Often Overlooked Deductions

Parking fees and tolls related to business travel are always deductible, regardless of which method you use.

We frequently see missed deductions among:

• CPA for Filmmakers attending paid parking locations
• CPA for Dental Practice clients traveling to multiple offices
• CPA for Online Commerce owners attending trade shows or supplier meetings

These expenses should be tracked separately.

Recordkeeping: The Most Important (and Most Ignored) Rule

No deduction survives an audit without records.

You must keep:

• Mileage logs showing date, destination, and business purpose
• Odometer readings (beginning and end of year)
• Receipts for actual expenses (if using that method)

Example of a Common Scenario for Amazon Businesses and Shopify Store Owners:

An online seller who drove to local suppliers and fulfillment warehouses but failed to maintain mileage logs. Despite legitimate business use, the deduction was reduced during review.

After implementing a proper tracking system, their deductions were fully supported—and increased in future years.

Where to Deduct Vehicle Expenses

Depending on your situation, vehicle expenses are reported on:

• Schedule C – Sole proprietors and single-member LLCs
• Schedule F – Farmers
• Form 2106 – Certain qualifying professionals

We ensure deductions are placed correctly to avoid processing delays and unnecessary notices.

Who Benefits Most From Proper Vehicle Planning?

At Velin & Associates, we commonly optimize vehicle deductions for:

• CPA for TikTokers & Creators driving to filming locations
• CPA for Shopify Store & Online Commerce owners
• CPA for Amazon Business sellers
• CPA for Doctors & Medical Practice owners
• CPA for Dental Practice & Dentists
• CPA for Filmmakers
• CPA for High Net Worth Individuals with multiple vehicles

Final Thoughts: Planning Beats Guessing

Vehicle deductions are powerful—but only when done correctly. Choosing the right method, documenting usage, and planning depreciation from day one can make a significant difference in your tax outcome.

At Velin & Associates, Inc., we don’t just prepare returns—we help clients make informed decisions that stand up to audits and maximize long-term tax savings. For more information about our tax planning services, contact us today: visit our website.

Velin & Associates, Inc

8159 Santa Monica Blvd STE 198/200 West Hollywood, CA 90046
323-902-1000
dmitriy@losangelescpa.org

CPA for YouTubers | CPA for Shopify Store | CPA for Online Commerce | CPA for Creators | Shopify Store CPA | CPA for Filmmakers | CPA for Amazon Business | Amazon Business CPA | CPA for Dental Practice | Dentist CPA | Dental Business CPA | CPA for TikTokers | CPA for Doctors | CPA for Medical Practice | CPA for High Net Worth Individuals