How do I deduct my vehicle, and what changes with an S-Corp?

There are two ways to deduct a vehicle you own and use in your business: the standard mileage rate or actual expenses. For 2026, the standard rate is 72.5 cents per business mile through June 30 and 76 cents per mile from July 1 through December 31.

For most owners driving a car they already own, standard mileage is the simpler method and often the better one. The heavy SUV write-off is real, but it is a cash decision first and a tax decision second. And once you elect S-Corp status, the question changes entirely.

Who this applies to

This article covers sole proprietors and single-member LLC owners who report on Schedule C, and S-Corp owners who also work in their company. It assumes a car, SUV or pickup used partly for business and partly for personal driving.

Who it doesn't

W-2 employees whose employer doesn't reimburse them get no federal deduction for business driving in 2026. The IRS confirms unreimbursed employee travel is generally not deductible as a miscellaneous itemized deduction, with narrow exceptions such as eligible educators and Armed Forces reservists.

This also doesn't cover fleets. The standard mileage rate isn't available when a business operates five or more vehicles at the same time.

Standard mileage or actual expenses: how does each method work?

Standard mileage. Multiply business miles by the IRS rate. The rate covers gas, insurance, repairs and depreciation in one number. Business parking and tolls are deducted on top of it.

Actual expenses. Add up the year's gas, insurance, repairs, registration, lease payments or depreciation, then multiply by your business-use percentage. If 60% of the year's miles were business miles, 60% of the costs are deductible.

Either way, the deduction lives or dies on records. IRS Publication 463 calls for the date, destination, business purpose and miles of each trip, plus total miles for the year, recorded at or near the time. A reconstructed log in April is weak evidence.

Commuting is never a business mile. The drive from home to a regular office is personal, however far it is.

Why the 2026 mileage rate changed mid-year

The IRS originally set the 2026 business rate at 72.5 cents in Notice 2026-10. Citing higher fuel prices, it then issued Announcement 2026-11, which raised the rate to 76 cents for expenses paid or incurred on or after July 1, 2026.

That means a 2026 mileage deduction is two calculations, not one. Miles before July 1 use 72.5 cents; miles from July 1 use 76 cents. A log that records dates handles this automatically. A single year-end odometer estimate doesn't.

Can I deduct an SUV over 6,000 pounds this year?

Often, yes. Here is why the 6,000-pound number matters.

Section 280F caps first-year depreciation on "passenger automobiles," defined as vehicles rated at 6,000 pounds or less (for trucks and vans, by gross vehicle weight rating). For 2026, that cap is $20,300 with bonus depreciation and $12,300 without it, under Rev. Proc. 2026-15.

A vehicle rated above 6,000 pounds isn't a passenger automobile under Section 280F, so those caps don't apply. Two other rules do:

• Section 179 SUV limit. For tax years beginning in 2026, Section 179 expensing on a sport utility vehicle rated up to 14,000 pounds is capped at $32,000 (Rev. Proc. 2025-32). Pickups with a cargo bed of at least six feet, and certain vans with no seating behind the driver, aren't treated as SUVs for this limit.
• Bonus depreciation. The 2025 tax law made 100% bonus depreciation permanent for eligible property acquired after January 19, 2025 (see IRS Notice 2026-11). Bonus can cover the business cost the $32,000 Section 179 cap leaves behind.

Two conditions apply to both. The vehicle has to be used more than 50% for business, and only the business-use share is deductible. A $90,000 SUV used 70% for business has at most $63,000 of deductible cost.

What happens if business use drops or I sell?

This is where the heavy SUV strategy bites. Under Section 280F(b), if business use falls to 50% or less in a later year, the excess depreciation you took over what slower straight-line depreciation would have allowed is added back to income that year.

Selling the vehicle triggers its own recapture. Under Section 1245, when the sale price exceeds the depreciated basis, the gain up to the depreciation taken (Section 179 included) is taxed as ordinary income. Writing off the full cost in year one means a sale at almost any price produces taxable income.

A worked example

The verdict: for an owner who needs a heavy truck to run the business, the write-off is a real benefit on a real purchase. For an owner who doesn't, standard mileage on the car already in the driveway usually leaves more cash in the bank.

How it changes for an S-Corp owner

Once you're an S-Corp, vehicle costs stop flowing through Schedule C. You're now an employee of your own company, and unreimbursed employee travel generally isn't deductible in 2026. The deduction has to run through the corporation. There are two ways to do that.

1. You own the car; the S-Corp reimburses you under an accountable plan. Under Treasury Regulation 1.62-2, a plan qualifies when expenses have a business connection, are substantiated, and any excess is returned. The regulation's safe harbor treats substantiation within 60 days and return of excess within 120 days as timely.

Reimbursed at the standard mileage rate, the S-Corp deducts the payment and you don't report it as income or pay payroll tax on it. One catch: an owner of more than 10% of the company still has to prove the miles to the IRS. The mileage log doesn't go away.

2. The S-Corp owns the car. The company deducts actual costs and depreciation, including Section 179 and bonus depreciation on a qualifying heavy vehicle. Business use is a tax-free working condition benefit. Personal use, including commuting, is a taxable fringe benefit that has to be valued and added to your W-2 wages.

The valuation rules in IRS Publication 15-B are less friendly to owners. The $1.50-per-commute rule isn't available to "control employees," which includes anyone owning 1% or more of the company. That leaves the cents-per-mile rule (for 2026, only vehicles worth $61,700 or less when first made available) or the annual lease value rule.

The verdict: for an owner with an ordinary car, accountable plan reimbursement is cleaner, with less paperwork and no fringe benefit math. A company-owned vehicle can make sense when the vehicle is expensive, used almost entirely for business, or needed to run the operation. Recapture risk follows it either way.

The vehicle question is one piece of the larger S-Corp decision. Whether the election pays off depends on profit, reasonable salary and whether the setup, including the accountable plan, actually gets done.

The bottom line

For 2026, the standard mileage rate is 72.5 cents per mile through June 30 and 76 cents from July 1. For most owners with a car they already own, it is the simpler method and often the better trade.

The heavy SUV deduction is real: $32,000 of Section 179 plus bonus depreciation on the business share. It only makes sense when the vehicle would be bought anyway.

With an S-Corp, the decision is accountable plan reimbursement versus company ownership, and either way the deduction depends on a mileage log. To talk through how this fits your situation, the next step is a 20-minute intro call.