IRS Publication 463: Car-Related Business Expenses & Deductions

Last Updated: December 9, 2025

IRS’s Publication 463 describes what costs are deductible, how to include them on your tax return, what documents you need to show your expenses, and how to handle any refunds you could get for your expenses. In this article, we’ve collected the most essential information you need to know as someone who drives a car for work.

Young couple reviewing irs publication 463

Table of Contents

Which part of Publication 463 is about car-related deductions?

Section 4 of Publication 463 provides guidance on tax deductions related to car expenses. The section outlines the rules and regulations surrounding these expenses, including what are deductible expenses, what documentation is required, and what limitations apply.

Types of Automobile Costs

Included among deductible auto-related costs on your tax return are:

  • Depreciation: is the expense of buying and maintaining a vehicle over time
  • Lease Payments: The expense of leasing an automobile
  • Registration Fees: The cost of registering your automobile with the state
  • The cost of your car insurance
  • The expense of repairs and maintenance for your automobile.
  • Cost of gasoline for trips related to business.
  • Tolls and Parking: The expense of tolls and parking costs associated with business travel
  • Necessary Documents for Automobile Costs

IMPORTANT: To claim car-related deductions, you must maintain accurate and well-organized documents that contain the date of the expense, the amount of the spending, the reason for the expense, and, if appropriate, the business relationship between the individuals involved.

Standard Mileage Rate vs. Actual Expenses Method

To maximize your car-related deductions, you must grasp the concept of the standard mileage rate vs. actual expenses method. The standard mileage rate is a predetermined amount of cents per mile driven for business purposes, but the actual expenses method considers the overall cost of operating your car for business purposes. By understanding the distinctions between these two approaches, you will be able to evaluate which one is ideal for your particular case.

Why Maintaining Records Is Crucial

If you’re a small business owner or at least self-employed, you are aware of the importance of maintaining precise records to maximize your tax deductions. This is particularly true regarding costs associated with travel, entertainment, gifts, and auto expenses.

You must keep sufficient records and supporting paperwork, as required by the IRS, to prove any deductions you claim.  Generally, you must keep detailed records of business expenses that include the followin information:

  • The date of the expense
  • The amount of the expense
  • The location of the expense
  • The business purpose of the expense
  • The names and relationships of the individuals involved, if applicable

For vehicle expenses you will also have to keep a mileage log, whether you use the standard mileage rate or the actual expenses method in order to determine car expenses truly tied to business.

How Long to Keep Records

You must maintain your records for at least three years from the date you file your tax return, according to IRS Publication 463. You might need to maintain your data for a longer period in some circumstances, though. For instance, you must preserve the documents for seven years if you want to claim a deduction for a bad debt or a loss from worthless assets.

Woman tracks mileage with a mileage tracker app to comply with IRS publication 463

What is a mileage log?

A mileage log serves as a record of the distance you travel for work. It contains the date of each trip, the beginning and finishing points, the intended use of the trip, and the distance traveled.

According to the IRS, “You should record the elements of an expense or of a business use at or near the time of the expense or use and support it with sufficient documentary evidence” to comply with the IRS’s recommendation that it be accurate and “should be” contemporaneous.

Some possibilities for keeping a mileage log are:

Whatever approach you go with, it’s crucial to maintain consistency and accuracy in your record-keeping.

Necessary details in a mileage log

Al business trips should be logged with the following information:

  • Date of the Trip: Record the exact day the trip took place. It may seem straightforward, but missing or unclear dates are a common audit concern.
  • Starting Point and Destination: Note where the trip began and where it ended. Be as specific as possible. City names alone may not be sufficient, so include street addresses or identifiable business names when you can.
  • Purpose of the Trip: Explain the reason for the drive, such as business, charitable work, or medical-related travel. Keep the description brief but clear.
  • Total Miles Driven: Document the precise mileage for the trip, from start to finish. Avoid rounding or estimating. Accuracy is essential.
  • Odometer Readings: You don’t need odometer readings for every trip, but you do need your vehicle’s odometer reading at the beginning and end of the year. These numbers help validate your total annual mileage and support the trips recorded in your log.

What does a “contemporaneous mileage log” mean?

A contemporaneous mileage log is a record of all the trips you make for business purposes, recorded at or near the time of the trip. To be considered contemporaneous, the log can be manually written, entered into Excel, or tracked in apps like mileage trackers, Google Maps, or a built-in GPS system.

Contemporaneous mileage logs should also be kept regularly and accurately, and be supported by evidence such as receipts, bills, and invoices.

If you’re tracking your business mileage using any of the methods mentioned above, even if you import your logs into MileageWise at a later date, it’s still considered contemporaneous because it was originally recorded at or near the time of your trip.

MileageWise, your designated mileage log solution

MileageWise is designed to help users stay tax compliant with IRS Publication 463, which provides guidance on tax deductions related to business expenses, including car expenses. Here are some ways in which MileageWise can help you stay tax-compliant with IRS Publication 463:

Google Timeline Trip Import

Don’t have a mileage log for a certain year in the past? Thankfully, Google Maps had already documented some of my journeys for you if you had Location History Turned on. MileageWise’s Google Timeline import tool turns those trips into accurate mileage logs.

Retrospective Mileage Log Recovery

Is your Google Timeline missing? Are you trying to find a solution to fill in the gaps in your mileage log? The AI Wizard mileage log generator was created specifically for that purpose. It provides you with trip suggestions after learning and analyzing your driving patterns.

Moreover, the Built-in IRS Auditor checks and corrects 70 potential red flags in your mileage log before allowing you to generate it, making sure it is 100% IRS-Proof.

Mileage Log Tax Preparation Service: What is it about?

Even though MileageWise’s program is quite simple, some would prefer to hire professionals to generate their ongoing or retrospective mileage records since they’re too busy to do it themselves.

MileageWise’s mileage log experts will quickly construct your mileage report using their Mileage Log Tax Preparation Service based on the information you provide them…you just need to download your IRS-Proof mileage log at the end of the day.

Try MileageWise for free for 14 days. No credit card required!

Automatic Mileage Tracker App

Apple App store
Google Play store

AI Logs & Google Timeline Import

Google Play store
Google Play store
Start On PC

Conclusion

By using MileageWise, you can simplify the process of tracking your mileage and expenses, while also ensuring that you are tax compliant with IRS Publication 463. With accurate tracking, detailed reporting, automatic recording, IRS-compliant reporting, and cloud-based storage, MileageWise can help you maximize your mileage deductions while minimizing your tax liability.

FAQ

IRS Publication 463 explains which travel, gift, and car expenses are deductible, how to report them on your tax return, and what records you must keep to support your deductions.

Common deductible expenses include fuel, maintenance, repairs, insurance, registration fees, depreciation, lease payments, tolls, and parking—if they are directly tied to business use.

The standard mileage rate simplifies the process by multiplying your business miles by a fixed IRS rate.
The actual expenses method requires tracking all car costs and calculating the percentage used for business. You may choose the method that gives you the higher deduction.

Keep your records for at least three years after filing your tax return. For certain situations—like claiming a loss—you may need to keep them for seven years.

Related Guides

Discovering common IRS audit triggers

IRS Audit Triggers: What You Need to Know

Follow guidelines and consult with a tax professional to avoid an IRS Penalty

IRS Penalty Guide: Types of Penalties and Relief Options

A Tax Preparation Checklist makes filing easier and faster.

Tax Preparation Checklist: Your Guide to a Smooth Tax Season

Understand Self-Employed Tax Deductions to save more

A Guide to Self-Employed Tax Deductions

Understanding self-employed taxes helps you stay compliant

Self-Employed Taxes: A Guide to Payments and Deductions

A 1099 Tax Calculator helps independent contractors estimated their tax payments

1099 Tax Calculator: Easily Calculate Self-Employment Taxes

Related Blogposts

Toll station on highway. Tolls are tax deductible.

Are Tolls Tax Deductible? What You Need to Know

woman realizes she overpayed in taxes

You Might Be Overpaying in Taxes: Guide to Stop Losing Money

young woman starts a small business

10+1 Best Small Business Tax Tips

Timeero

October 20, 2025 No Comments

Table of Contents Timeero Timeero is a time, location, and mileage tracking app designed for businesses and teams in the United States. It helps employers

Read More »

Milewise by Allstate

October 20, 2025 No Comments

Table of Contents Milewise by Allstate Milewise by Allstate is a pay-per-mile car insurance program offered by Allstate Insurance in the United States. It’s designed

Read More »

Hurldr

October 20, 2025 No Comments

Table of Contents Hurdlr Hurdlr is a finance and expense tracking app designed for self-employed professionals, freelancers, and gig workers in the United States. It

Read More »