Unreimbursed Employee Expenses - Vehicle Expenses

Can I deduct vehicle expenses as an employee?

For the 2026 tax year, most employees can't deduct unreimbursed vehicle expenses on their federal tax return.

The federal deduction for unreimbursed employee business expenses remains unavailable to most employees. However, certain taxpayers may still qualify to claim vehicle expenses on Form 2106, Employee Business Expenses. These taxpayers generally include:

• Armed Forces reservists
• Qualified performing artists
• Fee-basis state or local government officials
• Employees with impairment-related work expenses

If you don't fall into one of these categories, vehicle expenses you paid out of pocket for your job generally aren't deductible on your federal return. Some states may have different rules, so it's still worth entering the information if your state allows a deduction.

Standard Mileage Rate vs. Actual Expenses

If you qualify to deduct vehicle expenses, you'll generally need to choose between the standard mileage rate method and the actual expense method.

Standard Mileage Rate

The standard mileage rate is a per-mile amount established by the IRS each year. This rate is designed to cover the average costs of operating a vehicle, including:

• Gasoline
• Oil
• Maintenance and repairs
• Insurance
• Tires
• General vehicle wear and tear

You can use the standard mileage rate only if:

• You owned the vehicle and used the standard mileage method during the first year the vehicle was placed in service for business use, or
• You leased the vehicle and use the standard mileage rate for the entire lease period

If you previously chose the standard mileage rate for a leased vehicle, you generally must continue using that method for the duration of the lease.

Actual Expenses

Instead of using the standard mileage rate, you may choose to deduct the business portion of your actual vehicle expenses.

Examples of deductible actual expenses include:

• Gasoline
• Oil
• Repairs and maintenance
• Insurance
• Tires
• License plate fees
• Lease or rental payments
• Depreciation
• Tolls
• Garage rent
• Parking fees
• Registration fees

If you use your vehicle for both personal and business purposes, only the business-use portion of these expenses can be deducted.

Expenses You Should Not Enter on Form 2106

Do not include:

• Vehicle loan interest
• State and local personal property taxes

While these costs aren't deductible as vehicle expenses on Form 2106, personal property taxes may still qualify elsewhere on your return. If eligible, enter them in the Taxes You Paid section of your itemized deductions.

How to Enter Vehicle Expenses in the Software

If you qualify to claim unreimbursed employee vehicle expenses, enter them by following these steps:

1. Go to the Federal section.
2. Select Deductions.
3. Choose Select my forms.
4. Open Itemized Deductions.
5. Select Employee Business Expenses.

The software will guide you through the information needed to calculate any available deduction.

Business Mileage vs. Commuting Mileage

One of the most common mistakes is confusing business mileage with commuting mileage.

Business mileage may qualify for a deduction and generally includes driving:

• Between work locations
• To visit clients or customers
• To attend business meetings
• To run work-related errands

Commuting mileage is not deductible and includes driving between your home and your regular workplace.

Additional Information

For more details about deductible vehicle expenses, see IRS Publication 463, Travel, Gift, and Car Expenses.