Ask the Tax Editor: Tax Breaks for Vehicles

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Each week in our Ask the Editor series, Joy Taylor, The Kiplinger Tax Letter editor, answers questions on topics submitted by readers. This week, she's looking at four tax questions from readers on tax breaks for buying a vehicle, using a vehicle in your business and more. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. Is there still an EV credit?

Question: I am planning to buy an electric vehicle for personal use. Can I get a federal income tax credit for buying the car?

Joy Taylor: No. Unfortunately, the electric vehicle tax credit has expired. The up-to-$7,500 tax credit for buying a new EV and up-to-$4,000 tax credit for buying a used EV expired for vehicles bought after September 30, 2025. Last year's One Big Beautiful Bill repealed this popular tax break.

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2. What's the IRS's standard mileage rate?

Question: I am a self-employed real estate agent, and I use my car in my business. Each year, on Schedule C of Form 1040, I claim the IRS's standard mileage allowance as a deduction for my business driving. What is the standard mileage rate for 2026?

Joy Taylor: This year, calculating your mileage expense using the IRS's standard mileage rate is a bit more complicated than normal. For your business driving from January 1 through June 30, the rate is 72.5¢ per mile. The rate increases to 76¢ a mile for business driving from July 1 through December 31. The IRS opted to increase the standard mileage allowance due to higher gas prices at the pump caused by the U.S. war with Iran.

Note that the IRS also increased the standard mileage rate for medical travel to 23.5¢ a mile for the last six months of 2026. The rate is 20.5¢ a mile for January 1 through June 30, 2026.

3. Bonus depreciation for buying a new business vehicle

Question: I am self-employed and am planning to buy a new vehicle this year that I will use 100% in my business. Can you please tell me what tax breaks I might be eligible for by purchasing the auto?

Joy Taylor: Buyers of business vehicles get generous tax breaks, such as the following:

If you buy a heavy SUV used for business and place it in service after January 19, 2025, then you can write off the full cost of the vehicle because of 100% first-year bonus depreciation.
If you buy a big truck and put it into use this year, you can expense up to 100% of the cost (subject to the limit that the total amount expensed cannot exceed the taxable income from your business).
For other passenger automobiles bought and placed in service this year, you can take annual depreciation deductions. With bonus depreciation, you can deduct up to $20,300 in 2026, $19,800 in 2027, $11,900 in 2028, and $7,160 in each year thereafter. Absent bonus depreciation, you can deduct up to $12,300 in 2026, $19,800 in 2027, $11,900 in 2028 and $7,160 in each succeeding year.
If you finance the purchase of your business vehicle, you can deduct the interest that you pay each year on Schedule C.

Read more: Tax breaks for the self-employed.

4. Deductions when buying an auto for personal use

Question: I bought a car earlier this year for personal use. I took out a loan from the auto dealership to finance the car. Can I take a tax deduction for the interest that I pay each year on the loan?

Joy Taylor: It depends. Last year's One Big Beautiful Bill gave individuals a temporary deduction of up to $10,000 a year for interest paid on loans to buy a new vehicle for personal use. This break kicked in for 2025 tax returns filed this year and ends after 2028, unless lawmakers agree to extend it. It is available to people who itemize on Schedule A of Form 1040 and to those who claim standard deductions. Filers use Part VI of Schedule 1-A to figure the deduction. There are several requirements to take this deduction:

Only interest paid on the purchase of a new qualified passenger vehicle is eligible for the deduction. A qualified passenger vehicle is a car, minivan, van, SUV, motorcycle, or pickup truck with a gross vehicle weight rating of less than 14,000 pounds.
Final assembly of the vehicle must take place in the U.S.
The vehicle must be bought for personal use.
You must purchase the vehicle in 2025 or later. So, for example, if you financed the cost of a vehicle that you bought in 2024 for personal use, you cannot deduct the interest that you pay on the car loan.
You cannot deduct interest paid on a loan to buy a used vehicle.
The tax write-off begins to phase out at modified adjusted gross income (AGI) over $200,000 on joint returns and $100,000 on other returns and ends at modified AGI above $250,000 on joint returns and $150,000 on others. Modified AGI is AGI shown on line 11 of the Form 1040 plus any foreign earned income exclusion, foreign housing exclusion, and certain income excluded because it was received from sources in Puerto Rico, Guam, American Samoa or the Northern Mariana Islands.
The lender must file an information return with the IRS reporting the amount of interest received from the buyer of the vehicle and send a copy of that return to the purchaser. Note that the IRS provided some transitional relief on this requirement for 2025.

About Ask the Editor, Tax Edition

Subscribers of The Kiplinger Tax Letter, The Kiplinger Letter and The Kiplinger Retirement Report can ask Joy questions about tax topics. You'll find full details of how to submit questions in each publication. Subscribe to The Kiplinger Tax Letter, The Kiplinger Letter or The Kiplinger Retirement Report.

We have already received many questions from readers on topics related to tax changes in the One Big Beautiful Bill, retirement accounts and more. We will continue to answer these in future Ask the Editor roundups. So keep those questions coming!

Disclaimer

Not all questions submitted will be published, and some may be condensed and/or combined with other similar questions and answers, as required editorially. The answers provided by our editors and experts, in this Q&A series, are for general informational purposes only. While we take reasonable precautions to ensure we provide accurate answers to your questions, this information does not, and is not intended to, constitute independent financial, legal, or tax advice. You should not act, or refrain from acting, based on any information provided in this feature. You should consult with a financial or tax advisor regarding any questions you may have in relation to the matters discussed in this article.