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Can I Write off My Car Payment or Purchase for Delivery or Rideshare?

If you drive much as a rideshare contractor for Uber or Lyft, or as a delivery independent contractor for companies like Doordash, Instacart, Uber Eats and Grubhub, you can wear your car out quickly.

Repairs and replacement for all that wear and tear can be expensive. It can also keep you off the road. Sometimes the best thing you can do for your gig economy business is to replace your car with a new car or better used car.

Does that mean you can write off your car payments? Or even the whole purchase price?

No. the purchase of an asset like a car is not a deductible expense.

Then again, sort of. In a round about way, you may be able to a portion of it.

How's that for a definitive answer?

Unfortunately it's more complicated than a simple yes or no. The bottom line is, part of it depends on how you do your taxes. Part of it depends on how much of your driving is for taxes.

Car payment concept illustrated by a large stack of one hundred dollar bills stacked on top of a model car.

Here's the TL;DR (too long, didn't read) version of it all:

  • You can't write off the full car payment.
  • If you claim actual vehicle related expenses, you can write off a portion of the value of the car as depreciation
  • Future taxes MAY be higher if you claim depreciation
  • You can write off the business percent of the interest you pay on your loan.
  • If it's a lease payment and not a loan payment, you CAN write that IF claiming actual expenses.

This article, we'll dig into why all these things are true. We'll cover:

But first: some disclaimers.

This information is based on how taxes work for independent contractors and gig economy workers in the United States of America and based on the U.S. tax code.

EntreCourier is a website that speaks primarily to business aspects of delivery work for food delivery services like Doordash, Uber Eats, Grubhub, Instacart, Shipt and a variety of others, with an emphasis on independent contractor status in the United States.

Many countries do things similarly, however for information related to your country or jurisdiction, you should seek the advice of a tax professional who understands your particular tax laws.

And speaking of tax professionals: Get one!

I'm not a tax professional. This is not tax advice. Tax information on this site is only informational and for educational purposes. The goal here is to explain tax ideas in a plain English kind of way.

Everyone's tax situation is different. For tax advice related to your own tax situation, you should seek out your own tax professional. It's worth it.

Why buying a car is not a deductible expense

A toy car with a post it note over the side of it. The post it note has Tax Deduction written and then crossed out.

Put real simply, you're really just trading one form of money for another.

Maybe calling it money is overkill on the simplicity side. Anything that has value that can be used as a resource is called an asset. Cash is an asset. Money in your checking account is an asset. Your car is an asset.

In other words, you're replacing one asset with another. In exchange for $10,000, you get a car worth $10,000.

When your money or an asset goes away and there is no asset to replace it, that is when it's called an expense. You buy gas. You pay your phone bill. The money's gone, nothing is replacing it, and so you have less money than you had before.

If you spend one asset (cash) for another asset (your car) they call it a capital purchase. Overall, you are left with the same overall value in your assets. Thus, an expense never happened. has a good article that goes into more detail about the difference between assets and expenses.

Just like everything else, it's not always that simple. I mean, if you buy insulated delivery bags they call it an expense, not a capital purchase. But you're still trading a thing (money) for a thing (the bag). So why is that an expense but the car isn't?

Usually when things are expenses is when we don't think of the thing as having value. Supplies or tools are expenses. Cars, computers and furniture are assets.

How do you decide which is which? Sometimes they draw the line with what you paid for it. If it cost more than $2,500, it's an asset. Another rule of thumb you can use is, if you're more likely to sell it when you're done with it, it's more likely an asset.

How you may be able to write of much or all of your purchase price through depreciation

There is one way that your car becomes an expense. When it loses value, as most cars do.

Here's an example. I bought my old Buick for $2,600. After beating it up for two years putting thousands of miles on it, I sold that car for $1,200.

I had $2,600 cash. When I bought that car, I still had $2,600, only now the value was in the car, not in the cash. However, two years later, I only had $1,200 of that original $2,600. The loss of $1,400 is a legitimate expense.

When you lose value in your asset like that, it's called depreciation.

We bought an SUV two years ago. The dealership contacted us later and offered to buy it for more than we paid for it. With supply shortages during the pandemic, I guess that kind of thing is happening. If we were to take that offer, the extra money is income. That's because when all is said and done we had more than what we started with. This is called appreciation.

You cannot write off the purchase of your car as an expense. However, in some circumstances you CAN write off the depreciation of your car as an expense.

How the IRS lets you write off the depreciation of your car.

Large red Depreciation sign on a grey brick wall.

You can take a depreciation deduction for your car IF you claim the standard mileage deduction. We'll talk more about that in a moment.

To do so, you have to know two things:

  • How much value did your car lose?
  • What percent of your car use was for business.

How much value did your car lose?

It's easy to know how much value you lost if you've sold or traded your car in. In my example, I lost $1400. But what if you haven't sold your car?

Generally, the IRS says the useful life of your car is five years. In other words, you can write off the value of your car over a five year period. There's a straight line method that lets you take 20% off per year.

In the real world, most cars lose more of their value in the first two years and less in the last two years. For that reason, the IRS prefers using something called the Modified Accelerated Cost Recovery System (MACRS) which lets you claim more depreciation in the first years you own the vehicle.

Publication 463 ont he IRS website goes into a lot more detail about how depreciation works with your car. The calculations can be a little more complicated than I can do justice to here. However, most tax prep software programs will help you with it. Of course, the best source for figuring out how to depreciate your car is your tax professional.

What percent of your car use was for business?

Once you've figured out how much your car depreciated, you have to figure out how much of that you can claim. Most of us use a personal vehicle for our businesses. You can only claim the amount of depreciation that relates to the business use of your car.

You can claim the business percentage of your car use. Here's how you figure it out:

  1. How many miles did you drive your car for the year? At the start of the year (or when you buy your car) you should write down the odometer reading. Then do it again at the end of the year (or when you sell your car). The difference between the two is your total.
  2. How many miles were for business? The IRS requires a written log if you want to claim car expenses, whether taking the standard mileage deduction or the actual value method. Track every mile that you drive for delivery or rideshare. If you forgot to track miles, there may be alternatives to help you know how many miles were for business.
  3. Divide your business miles by total miles to get your business percentage. Say you drove 25,000 miles total and 20,000 miles were for business. 20,000 divided by 25,000 = 0.8, or 80%
  4. Multipliy your business percentage times the depreciation of your car. Say you figured out that your depreciation was $5,000 and had 80% of your miles for business. You can claim 80% of that $5,000, or $4,000.

The IRS has special circumstances that allow you to write off much (if not all) of the purchase price of your car.

To encourage businesses to invest in assets, the United States Government created special rules that let you write off a significant portion of the purchase price in the first year, instead of doing it over five or more years.

You can use a special rule called Section 179 that lets you write off the purchase price, up to a limit. There's also a bonus or special depreciation allowance that expands what you can claim in the first year.

With the special depreciation and Section 179 you could write off up to $18,200 of the purchase price of your car in the first year (2021 tax year).

What that means is, even if you finance the automobile with a car loan, you could write off a large part of the purchase price as depreciation. Talk to your tax professional to determine how much you might be eligible.

There are some tax repercussions if you choose this write off. You cannot claim the standard mileage method if you do this. Doing so could cost you more in future taxes (see our next point). Finally, if you sell your car for more than you wrote off in depreciation, you may have to claim the difference as income.

How Standard mileage vs actual expenses fits into this and the long term tax implications

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I mentioned this a couple of times already. You can only claim the depreciation, or loss of value of your car, if you are using the actual expense method for writing off your car expenses.

You may not claim the Section 179 or bonus depreciation if you claim the standard mileage deduction.

If you claim the standard mileage allowance of 56¢ per mile (for 2021, 58.5¢ in 2022) you can not claim any depreciation.

Here's why that is. The standard mileage allowance was introduced as an alternative to simplify the way you claim your car business deductions. It allows you to claim a flat rate per business mile driven. The alternative is to track every single expense and keep good records related to your car then figuring out the business percentage of use.

It's either/or. You can not do both. You can either claim the miles or you can claim the actual expenses (including depreciation). Unfortunately, You can't do both.

The thing is, 56 cents a mile is pretty generous. For most of us, the actual cost per mile is far less than that. That's a great benefit for delivery and rideshare drivers because our actual profit is greater than our taxable profit.

One of the few exceptions, where actual expenses are greater than the mileage rate, is if you take some of that extra depreciation the first year that you bought your car.

Beware of this if you choose to take the depreciation and actual method:

There's no going back.

The IRS has said that if you claim the actual expense method, you can never use the standard mileage allowance for that car. You have to claim actual expenses every year you use that car.

Long term implications

What that means is that while actual expenses could offer a higher deduction the first year you own your car, it may cost you in later years.

In other words, you CAN write off much or all of the purchase price. It might not be the best way to go.

Think about it this way. Say you bought a car for $10,000 and drove 20,000 miles. For illustration purposes you drive 100% for business. You pay another $4,000 for gas, maintenance, insurance, registration fees, all the things.

That's $14,000 you can write off if you take the special depreciation. At $0.56 per mile, you could only claim $11,200. Seems like a no brainer, right?

Except for this: Next year, all you can claim are the gas, maintenance, insurance, registration, repairs etc. You can't claim any depreciation. The standard mileage rate is off the table. Now you're only taking $4,000 for your car-related expenses instead of the $11,700 for the mileage allowance (at 58.5¢/mile).

In this example, in order to claim $2,800 extra in business expenses this year, you cost yourself $7,700 in deductions the next year. And more for following years.

Now let's say that you sell your car for $4,000 two years later. You have to claim that as income. That's pretty much the same as costing yourself an additional $4,000 in deductions.

While that means that you MAY be able to write off much or all of your purchase price as a special depreciation, that may not be the best long term strategy.

Writing off the interest portion of your monthly payments

Can I write off my car payment?

No. the actual car payment amount is irrelevant to your income taxes. Even if you use the actual expense method, all you can claim is the depreciation. The way you do that is unrelated to your actual car payment.


This is the best news in the whole article:

You CAN claim the INTEREST portion of your car payment. More precisely, you can claim the business percentage of the interest.

And here's the good news part of it all: You can claim that interest even when taking the standard mileage deduction. It's one of three car related expenses that drivers for Uber, Lyft, Doordash, Instacart and others can claim even when taking the standard deduction.

Here's why: The standard mileage allowance is designed to compensate for common costs of operating your car. They used several factors to determine the rate: Depreciation, fuel, maintenance and oil changes, insurance, registration, repairs, wear (such as tires). Interest was not a factor.

Screenshot from IRS Publication 463
Screenshot from IRS Publication 463 about actual expenses. Notice that interest is not listed.

There are a couple of things to think about here. One, your car costs the same amount to operate whether you finance it or pay cash. The other is that interest is not a cost of operating your car, but a cost of obtaining it.

To claim the interest portion of your car payment, you need to find out from your lender how much you paid in interest. Then calculate the business percent of your miles like we talked about above. Multiply that against the total interest, and that figure goes on line 16-b of Schedule C.

What about a lease payment?

As mentioned above, you can not write off your car payment.

However, here's where it's very important to understand if you have a lease or a loan.

You CAN write off the entire monthly lease payments if they are indeed a lease and not a loan. However, you can only do this if you are claiming the actual car expenses instead of the standard mileage deduction. You cannot claim both the lease payment and mileage.

There's a reason that you can claim the payment if it's a lease but not if it's a loan.

When you take out a loan, you are the one who owns the vehicle. Remember what we talked about earlier about assets and how you get something of value back for your purchase price.

However, when you lease your car, you never technically own it. The lease company owns the car, and you are just paying them to be able to use it.

With a lease, you are not receiving an asset back for the payment you make. Therefore, the money you give them is an expense.

What you need to do in order to write any of this off.

In summary:

  • You can not write off the car payment itself.
  • However, you CAN claim the business percentage of the interest you pay for your car loan.
  • You can not write off the purchase price as an expense.
  • However, you CAN write off the loss of value or depreciation (business percent only) of your car but only if claiming actual expenses.
  • If your payment is a LEASE and not a loan, you can write the business percent of the interest.

cartoon image of a man holding up a sign saying "What's next?

Are any of these applicable for you? What do you need to do in order to claim the appropriate part of your car payment or purchase price? Here are some action steps you could take:

1. Get a tax professional.

I can't recommend this strongly enough. While I tried to explain the concepts in this article, some of the calculations are complicated. Especially when it comes to depreciation. A tax pro can look at your individual situation and advice you based on that.

2. Track everything.

The important question if you want to write off depreciation on your car is, is actual value or mileage better for you? You can't know unless you know the totals for both. Keep a record of both so you can better compare.

3. Track your miles.

I know, I just said track everything.

However, it's critically important that you know how many miles you drove for business, whether you claim the standard mileage allowance or you use actual costs.

You can't know how many miles you drove for mileage if you don't track. You can't know what percent of miles is for business if you don't know how many miles you drove for business.

There are a number of good ways to track. I keep a business mileage log in Google Sheets. If you prefer a GPS program, I recommend either Hurdlr or TripLog. Both have paid or free versions. Those are affiliate links, meaning I may make a commission if you purchase the program. However, I've looked at all of them and these are the two that stand out.

4. Determine if actual expenses or the standard mileage rate is best for you.

My belief is that the mileage rate is almost always going to be better for you. Especially when you consider the long term implications. Obviously, in the end, that's a decision you have to make.

If you are taking the standard mileage deduction, you can still claim the business percent of the interest portion of your payment. However, when taking the mileage rate, you cannot claim depreciation or the lease payment.

5. Understand your payment.

Is it a loan or a lease? Knowing that will help you know whether you can claim the enitre payment (lease) or only the interest (loan). If it's a loan and you're claiming actual expenses, you can also claim loss of value or depreciation.

If your payment is a loan, you also need to know how much of the payment is interest. Your lender should be able to help you with that.

6. Get a tax pro

See action step 1.

Frequently asked questions about writing off your car payment or purchase price

Fair warning: A lot of what I write here will be repetitive. I'm including these questions for those who skip ahead to the particular question listed below. Forgive me if some of the questions are repetitive as well.

Here are the questions we'll address:

Can I write off my car payment in my taxes?

If your payment is for a loan, your car payment will never be the basis of a tax write off or deduction. If you are an employee, you cannot currently claim unreimbursed car expense tax deductions thanks to the Tax Cuts and Jobs Act of 2017. Self-employed individuals or small business owners, such as a gig economy independent contractor for Doordash, Uber Eats, Lyft, Uber, Instacart, Grubhub and others, you may claim the business percentage of the interest part of your car loan, but not the principle. If self-employed and also claiming actual expenses, you can claim the business percentage of the loss of value of your car (also known as depreciation)

If your payment is for a lease you may claim the business percentage of the entire payment only if you are claiming actual expenses. You cannot claim the payment as an employee. You can only claim the portion of the payment that equals the percentage of miles you drove for your self-employment business.

How much of my monthly car payment can I write off?

If your payment is a loan, you can write off the business percentage of the interest portion of your payment.

If your payment is a lease, you can write off the business percentage of the entire payment, but only if you are claiming actual expenses and not taking the standard mileage rate method.

Can I use my car payment as a tax write-off if I use my car for work?

If the use is for work as an employee, no. Unreimbursed car expenses cannot be used as a tax deduction under the Tax Cuts and Jobs Act of 2017, which is set to expire in 2025.

If the use is for work in your own business, you may be able to write off parts of the payment. If you are self-employed, see FAQ #1

Can I write off my car payment if I advertise on it?

Putting advertisements on your car, whether for your own business or for someone else, does not change the nature of whether the use is for business or personal purposes.

Putting display material that advertises your business on your car doesn’t change the use of your car from personal use to business use. If you use this car for commuting or other personal uses, you still can’t deduct your expenses for those

Internal Revenue Service Publication 463.

In other words, all the old rules apply. You can only claim deductible expenses for the miles that you drove for business purposes as a self-employed individual. Unreimbursed miles for work as an employee cannot be currently claimed.

If your miles driven are for your business, the portions of your payment are determined in the article above and in FAQ#1.

Can I write off my miles and car payment?

You can write off the percent related to the business use of the vehicle for the interest portion of your monthly payment if it is a loan payment. You can never write off the principle part of your payment. If you claim miles, you can not also claim depreciation.

If your payment is a lease payment, you can not write off both miles and the payment. You must choose between the standard rate and the actual expenses which includes your lease payment.

Can I write off my work car lease payment?

If the car is a work car as an employee, no. Unreimbursed car expenses are not currently deductible. You should seek out a reimbursement plan with your employer.

If by work car, you are referring to a car used for your business, you can claim the lease payment, but only if you are claiming the actual expense method.

Can I write off my down payment on a car?

No. Downpayment on a car has no bearing on what you can claim as a business expense for your car. The downpayment is like the principle portion of your monthly loan payment, in that it does not impact what you can write off. Because the payment is related to an asset, you would need to claim depreciation rather than any form of downpayment or principle. Keep in mind that depreciation can only be claimed if you are using the actual expense method.

When can I write off my car payment on my tax return?

The only time you would be able to write off the total payment is when all three of the following apply:

  • Your payment is a lease payment, not a loan
  • You claim the actual expense method
  • 100% of miles driven are for your business.

You cannot claim the lease payment and miles at the same time. If it is a lease payment, you can only claim the percentage of that payment that equals what percent of your miles are for business.

If this is a loan payment, you can never claim the entire payment. You can however claim the business percentage of the interest portion of the loan payment.

Will creating an LLC to drive for Uber, Lyft, Doordash, Uber Eats, Instacart etc let me write off my car payment?

Creating a single member LLC will not change anything as far as how you can treat your car payment. A single member LLC is taxed the same way as a sole proprietor.

Other ways of incorporating may actually limit you further in what you can claim and get tricky in things like whether you are actually an employee. In such situations, it's better to just say “ask your tax professional.”

Could this help someone else? Please share it.

Ron Walter of

About the Author

Ron Walter made the move from business manager at a non-profit to full time gig economy delivery in 2018 to take advantage of the flexibility of self-employment. He applied his thirty years experience managing and owning small businesses to treat his independent contractor role as the business it is.

Realizing his experience could help other drivers, he founded to encourage delivery drivers to be the boss of their own gig economy business.

Ron has been quoted in several national outlets including Business Insider, the New York Times, CNN and Market Watch.

You can read more about Ron's story,, background, and why he believes making the switch from a career as a business manager to delivering as an independent contractor was the best decision he could have made.

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