Key takeaways
- Settle the method first, because the method decides which documents count.
- A mileage log needs the date, destination, purpose and miles for every trip.
- The 2026 business mileage rate is 72.5 cents through June 30 and 76 cents from July 1.
- A lender issues Form 1098-VLI when it receives $600 or more of interest on one vehicle loan in a calendar year.
Choose the method before collecting anything
Under the standard mileage rate, the client multiplies business miles by the IRS rate for the date of each trip. Under actual expenses, the client deducts the business share of gasoline, oil, repairs, insurance, license plates and depreciation. The method decides which documents you request, so settle it first.
For 2026 travel, the business rate is 72.5 cents per mile from January 1 through June 30 and 76 cents from July 1 through December 31. The 2025 rate was 70 cents. A client who drove in both halves of 2026 needs trip dates in the log, not one annual total.
Publication 463 says the standard rate must be chosen in the first year the car is available for business use and can't be revoked, although the client may switch to actual expenses in later years. It also says the standard rate is not allowed if depreciation was claimed on the car by any method other than straight line, or under MACRS. Pull the prior returns before the client chooses.
Documents for the standard mileage rate
The core document is the mileage log. Publication 463 says it should show the mileage for each business use and the total miles for the year, which gives the business-use share.
Table 5-2 in the publication lists date, destination, business purpose, odometer start and stop readings, and miles for each trip. A log without a destination and purpose is weak support, so ask for both, even if the client's app leaves them out by default.
The IRS recommends recording each trip at or near the time it happens. The common failure is a log rebuilt from a calendar in April. Ask for an app export or a dated monthly sign-off, and label any rebuilt entry with the date it was made.
Example: a client drove 9,000 business miles in 2026, with 4,000 from January through June and 5,000 from July through December. The firm applies 72.5 cents to the first 4,000 miles and 76 cents to the other 5,000. An annual total with no dates forces a guess about the split.
Documents for actual expenses
Keep a receipt or statement for each running cost. Schedule C line 9 takes the business share of gasoline, oil, repairs, insurance, license plates and similar costs. The Schedule C instructions say that when the standard rate is claimed, depreciation, rent or lease payments and actual operating expenses are not deducted.
The business share comes from the log. Nine thousand business miles out of 12,000 total miles gives the share, which applies to every running cost, so an actual-expense return still needs the full log. If a fuel bill went on a personal card, ask for the card statement and the log rather than deducting the bill whole.
Auto loan interest and Form 1098-VLI
A lender files Form 1098-VLI when it is engaged in a trade or business and receives $600 or more of interest on a single vehicle loan from an individual in a calendar year. Box 1 shows the interest, Box 2d the VIN and Box 7 whether final assembly occurred in the United States.
For interest received in 2025, Notice 2025-57 let lenders make the total interest available through an online portal or a monthly statement instead of the form. Ask the lender in writing for “the total interest I paid on my vehicle loan in calendar year 2025,” and ask for the VIN on the loan.
Separately, for tax years 2025 through 2028, an individual may deduct up to $10,000 of qualified passenger vehicle loan interest. The loan must have been originated after Dec. 31, 2024, original use must start with the taxpayer, final assembly must be in the United States, and the gross vehicle weight rating must be under 14,000 pounds. Lease payments do not qualify, the VIN must be on the return, and the deduction phases out above $100,000 of modified adjusted gross income ($200,000 for joint filers). The IRS describes the claim on Schedule 1-A, Additional Deductions.
Decision rule: if the car is personal only, the interest goes only on the personal deduction. If the car is used for business, split the interest by the log's business share and claim only the personal part on the personal deduction, so the same interest is not claimed twice.
Registration fees and the SALT deduction
A registration fee is deductible on Schedule A only as a personal property tax, and only where the fee is based on the car's value alone and imposed yearly. The 2025 Schedule A instructions say to enter it on line 5c. The part of the fee based on weight is not deductible.
The document that does the work is the renewal notice or the state's breakdown of the fee. A lump sum with no split cannot be partly deducted until the client gets the split. Ask the client to send “the registration renewal notice and any statement showing how the fee is split between vehicle value and weight” so the firm can see the split.
The fee only helps if the client itemizes. The 2025 state and local tax limit is $40,000 ($20,000 if married filing separately). For 2026 it is $40,400 ($20,200 if married filing separately), reduced when modified adjusted gross income exceeds $505,000 ($252,500 if married filing separately), and never below $10,000 ($5,000 if married filing separately).
For a business car, the business share of the fee is a running cost on Schedule C line 9 under actual expenses, because the line 9 instructions list license plates. Under the standard rate, do not add it again, and do not deduct the same fee on both Schedule A and Schedule C.
Documents to request for each return
Standard rate: the full-year log, the purchase paperwork showing when the car went into business use, the odometer readings at the start and end of the year, and the Schedule C, Part IV answers, which the IRS instructions say are completed when the standard rate is claimed.
Actual expenses: every running-cost receipt or card statement, the full log for the business share, the purchase contract and the prior year's depreciation schedule.
Loan: the annual interest statement (Form 1098-VLI, or the lender's 2025 statement), the origination date, the VIN and a short written note on personal and business use. Registration: the renewal notice showing the value split, and the Schedule A worksheet if the client itemizes.
Retention and failure modes
Publication 463 says records supporting a deduction generally must be kept for 3 years from the date the return claiming it is filed. The IRS guidance on record retention gives 6 years where income that should be reported is left out and it is more than 25% of gross income. Property records, including depreciation, are kept until the period of limitations expires for the year the car is sold or disposed of.
Common failures: a standard rate chosen for a car already depreciated by an accelerated method, so check the prior return. A log that stops mid-year, so ask for the missing months, label rebuilt entries, and do not deduct miles the client cannot tie to a trip. A loan with mixed use claimed in full, so split it by the log share. A registration fee deducted on both schedules, so take it once.