This question reminds me of the small town in the Midwest that was running a driver safety program some years ago. To help publicize the program, the Police Chief and Mayor went out together one day to patrol the streets, accompanied by a camera crew from the local TV station. Within a few minutes, the Chief identified a car being driven very safely, following the letter of the law perfectly as it drove through the town. The police car pulled the startled driver over, who looked like a deer in the headlights when he saw the Chief, Mayor, and camera crew alongside the car, staring in through his rolled-down window. The Mayor soon put the poor fellow at ease: “Don’t worry, you haven’t done anything wrong. The Police Chief and I noticed what a great job of driving you were doing, and we’d like to reward you with this $100 bill as part of our Safe Driver program.” The man accepted the money, looking quite relieved, and then the live on-air reporter stepped forward: “So, what do you plan to do with that $100?” she asked. “Well,” he proudly replied, “The first thing I’m gonna do is get me a driver’s license!”
Although the man in that story would have other things to think about than whether he could deduct the cost of his license, where do the rest of us stand on this matter?
As we all know, self-employed taxpayers who use their car for business purposes can deduct a number of different expenses related to operating the car. As we have seen in other articles on this site, they can claim their actual car expenses or they can claim a certain amount (65.5 cents for 2023) for each business mile they drove during the year. It stands to reason that if you use your car either partly or fully for business, then the cost of running that car is a legitimate part of the cost of doing business. And the tax law states that any ordinary and necessary expenses that you incur while running your business are tax deductible. Following this line of thought, you would never drive your car for personal or business purposes if you didn’t have a driver’s license (unlike the man in our story). Therefore, your driver’s license fee is also part of the cost of doing business and thus it is deductible, right? Well, not quite, I’m afraid.
The IRS specifically regards your personal driver’s license as a nondeductible personal expense. The only exception is if you have a commercial driver’s license that is required for your business. For example, you have a landscaping business and you use a truck for hauling supplies like soil, boulders, and so on. If driving that truck requires a commercial driver’s license in your state, then the cost of that license is deductible. You still can’t deduct your personal license but at least you get a break on the commercial one.
You can kind of see the logic there, namely that you would probably never get a commercial driver’s license unless you needed it for work, whereas almost every adult over a certain age is likely to have their own driver’s license for personal use, regardless of whether they also drive a car as part of their work.
As stated earlier, apart from your driver’s license, there are other expenses related to the business use of your car that you can deduct. But make sure to keep accurate and contemporaneous mileage logs as well as receipts for your car expenses. This is a frequently audited deduction and, without good documentation, the amount claimed will not likely be allowed.