Farm Income - Car and Truck Expense

For farm income, car and truck expenses are deductible as part of your farm business expenses, provided they are ordinary and necessary for farming operations. You may deduct either the actual operating costs or use the standard mileage rate, depending on your circumstances and the number of vehicles in use.

Standard Mileage Rate

The standard mileage rate for 2025 is 70 cents per mile for business use of a car, van, pickup, or SUV. You may use this rate only if you meet specific conditions:

• You owned the vehicle and used the standard mileage rate in the first year it was placed in service, or
• You leased the vehicle and are using the standard mileage rate for the entire lease period.

If you use the standard mileage rate, you must include parking fees and tolls in your deduction. However, you cannot deduct depreciation, rent, lease payments, or actual operating expenses when using this method.

Actual Expenses

You may deduct actual expenses for operating a vehicle used in farming, including gasoline, oil, repairs, insurance, license plates, and depreciation (subject to limits). You must allocate expenses between business and personal use. Only the business portion is deductible.

Note: You must use actual expenses if you operate five or more vehicles simultaneously in your farm business (e.g., fleet operations). You cannot use actual expenses for a leased vehicle if you previously used the standard mileage rate for that vehicle.

Business Use Percentage

You can claim 75% business use without detailed records if you used the vehicle during most of the normal business day for farming activities (e.g., cultivating land, feeding animals, driving to supply stores). This 75% allocation allows you to choose either the standard mileage rate or actual expenses. Once chosen, you cannot switch methods later.

If you maintain records showing more than 75% business use, you may claim a higher percentage.

Reporting Requirements

All vehicle expenses (actual or standard mileage) must be reported on Schedule F (Form 1040), Line 10. If claiming any vehicle expenses, you must also complete Form 4562, Part V, and attach it to your return.

Depreciation is reported on Line 14 of Schedule F, and lease payments on Line 24a. If you lease a vehicle for 30 days or more, you may need to reduce your deduction by an inclusion amount (see Chapter 4 of Pub. 463).

Additional Considerations

• Federal Highway Use Tax: You may deduct federal use tax paid on trucks or truck tractors used in farming. See Instructions for Form 2290 for details.
• Leased Vehicles: Special rules apply to leases with terminal rental adjustment clauses. These are treated as leases if they otherwise qualify.
• Interest Allocation: If a loan is secured by farm property but used for personal purposes (e.g., buying a personal car), interest must be allocated to personal use and is not deductible for farming.

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Disclaimer: Always verify details with current IRS forms and instructions from the Federal or State Department of Revenue. For complex situations, consult a CPA or tax attorney.