Vehicle expenses are one of the biggest deductible costs for an HVAC business, and also one of the most commonly mishandled, because the rules genuinely are more complicated than most owners expect.

The first decision is choosing between the standard mileage rate and the actual expense method, and you generally have to pick one and stick with it consistently for that vehicle. The standard mileage rate is simpler, applying a set rate per business mile driven, while the actual expense method tracks real costs, fuel, maintenance, insurance, depreciation, and deducts the business-use percentage of those actual costs. For a business vehicle used heavily and with high actual costs, the actual expense method sometimes produces a bigger deduction, but it also requires much more detailed recordkeeping to support it.

The mistake we see most often isn't picking the wrong method. It's not tracking mileage or business-use percentage accurately enough to support whichever method was chosen, which becomes a real problem if the IRS ever asks for documentation. A verbal estimate of "mostly business use" doesn't hold up. What holds up is a mileage log, whether that's a physical log, an app that tracks trips automatically, or records pulled from a fleet tracking system, showing actual business miles driven.

Personal use of a company vehicle creates its own wrinkle. If a truck gets used for both business calls and personal errands, only the business-use percentage of expenses is deductible, and that percentage needs to be reasonably documented, not just assumed. We see this mixed-use situation handled loosely more often than any other vehicle issue, and it's exactly the kind of thing that draws scrutiny in an audit because it's an easy area to overstate without realizing it.

Getting this right isn't complicated once a consistent tracking habit is in place. It just requires setting it up correctly from the start rather than trying to reconstruct a year's worth of mileage from memory when tax time arrives.

Jeremy Brewer is the founder of 911 Bookkeepers LLC in Baton Rouge, Louisiana. He worked in the field as an HVAC tech before building books for the trades, and he serves as a licensed paramedic in EMS. He is a Xero Certified Advisor.