Drive a Car Last Year? Here Are Some Last-Minute Tax Tips

General info on what you can and can't deduct on your 2018 tax return for leasing or owning a car.

Senior businessman in front of black van waiting with digital tablet.

Tax day is Monday. If at any point in 2018 you drove your car to complete a job, this is a last-minute reminder that you can deduct certain expenses from your 2018 tax return.

The Tax Cuts and Jobs Act of 2017 is the first major overhaul of the U.S. tax code in a long time. Most of the cuts aren't expected to last past 2026, when another Congress can either elect to extend or remove them. For now, when it comes to owning a car, the IRS has never been more generous.

The same caveat for deducting vehicle expenses remains: You must calculate the exact percentage of how often you drive your car in a given year for business. That means you'll need to be self-employed or work for a company that requires you to use your own car for business travel. Here's a broad-brush view of what has changed for vehicle leasing, owning, and mileage.


Someone who uses a leased car 100 percent for business may be able to deduct the entire monthly lease payment, as long as the car's total value is less than $50,000 and that person doesn't buy the car after the lease expires. The IRS mandates "inclusion amounts" that reduce the amount you can deduct when a vehicle's value is more than $50,000. That prevents luxury-car owners from claiming a full write-off on a G63 AMG, for example. However, previously, the IRS cap was at $19,000 for passenger vehicles and $19,500 for trucks and vans (including heavy SUVs such as that over-the-top Mercedes). But this means you can lease a more expensive car and deduct more of it than before. For example, if you only drove a third of the year for business, you can deduct only 33 percent of the lease payments before factoring in those inclusion amounts.


When you purchase or finance a car, the IRS lets you depreciate that car over a specified time, subject to limits. If you bought a car in 2018, those limits for passenger cars (defined as anything less than a 6000-pound gross vehicle weight rating) are up significantly. The maximum first-year depreciation is $18,000, compared to $11,160 in 2017. Owners of trucks and SUVs above the 6000-pound limit (most full-size luxury SUVs) are allowed to write off the entire cost of the vehicle in the first year if the vehicle is used entirely for business. Also new for 2018, used cars and trucks are now eligible for write-offs. There are still several accounting methods you can choose to depreciate your vehicle, and you'll need to be consistent in the following tax years.


For 2019, the IRS announced it has raised mileage expense rates to 58 cents per mile from 54.5 cents, the rate in effect for your 2018 tax filing. This is the flat rate employers can reimburse an employee for business travel in a personal car—which factors in wear and tear in addition to fuel without accounting for all of the employee's individual car expenses. However, if your employer doesn't reimburse you for mileage and you used to claim these expenses as personal deductions, the new tax law doesn't let you anymore. That's going to be a significant loss if you have no other way to offset those costs.

None of this constitutes advice from a tax professional. So if you’re really confused and out of time, seek a Certified Public Accountant and file an extension.

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