This is one of the questions I hear most, and the honest answer is: not the way people picture it. You do not deduct the monthly car payment. You deduct the business use of the car, and there are two ways to do that.
The payment is not the deduction
A car loan payment is part principal, part interest. The principal, paying back what you borrowed, is never a deduction. That is you buying an asset. The tax code lets you deduct one thing: the cost of using the car for business. You measure it one of two ways.
Method 1: Standard mileage
You track your business miles and multiply by the IRS rate. For 2026 the rate changed mid-year because of fuel costs, so you track it in two parts.
| 2026 business miles | Rate |
|---|---|
| Jan 1 to Jun 30, 2026 | 72.5 cents per mile |
| Jul 1, 2026 onward | 76 cents per mile |
This method rolls gas, insurance, repairs, and wear into one number. You keep a mileage log: date, purpose, miles.
Method 2: Actual expenses
You add up what the car costs for the year, then deduct the business-use percentage. Drive 60 percent for business, deduct 60 percent of the costs. This is where the loan comes back in: the interest on a business-use car loan is deductible under this method, and depreciation lets you write off the vehicle cost over time. The principal is still not a line item. Depreciation is how the purchase price gets deducted.
You do not write off the car payment. You write off the business use of the car.
The rule that gets people audited
Business use has to be real
A car used 100 percent for business is rare, and the IRS knows it. Your commute from home to a regular workplace does not count as business miles. Mixing personal and business driving with no log is the fastest way to lose the deduction. Track the miles.
Which method wins
For a newer or expensive car with high running costs, actual expenses tend to deduct more. For an efficient, paid-off car driven a lot, standard mileage is simpler and can be larger. You compare, but once you use actual expenses with depreciation on a vehicle, your future options narrow, so the first-year choice matters.
If you use your car for business and want to know which method saves you more, and how to log it so it holds up, that is a quick conversation. Book a consultation.