If you use your car for work, you have two ways to deduct that expense: the standard mileage rate or the actual expense method. Most people guess and pick one. But the right choice depends on your car, your driving habits, and how much you’re actually spending — and it can be worth hundreds of dollars either way.
What Is the Standard Mileage Rate?
The standard mileage rate is a flat per-mile deduction set by the IRS each year. For 2025, the rate is 70 cents per mile for business use. You multiply that rate by the number of business miles you drove during the year, and that’s your deduction.
For example: if you drove 12,000 business miles in 2025, your deduction is 12,000 × $0.70 = $8,400.
The rate is designed to cover gas, depreciation, maintenance, insurance, and other vehicle costs — all bundled into one simple number. You don’t need to track individual receipts for those items, just the miles.
What Is the Actual Expense Method?
With the actual expense method, you add up every dollar you spent on your car during the year and deduct the percentage used for business. Expenses include:
- Gas and oil changes
- Insurance
- Registration fees
- Repairs and maintenance
- Lease payments (or depreciation if you own the car)
- Parking and tolls
- Car washes
If your car was used 60% for business and you spent $9,000 on it during the year, your deduction is 60% × $9,000 = $5,400.
Standard Mileage vs. Actual Expenses: Which Is Bigger?
There’s no universal answer — it depends on your situation. Here’s how to think about it:
Standard Mileage Rate Tends to Win When:
- You drive a high number of business miles (40,000+ per year)
- You have a fuel-efficient car with low operating costs
- You don’t want to track every receipt throughout the year
- You own the car (no lease payments to factor in)
Actual Expenses Tend to Win When:
- You drive an expensive car with high operating costs (luxury car, truck, SUV)
- Your car has high repair bills or fuel costs
- You’re leasing and want to deduct lease payments directly
- You drive relatively few business miles but have large car expenses
The Rules You Have to Know
You must choose a method in the first year you use the car for business. If you start with the standard mileage rate, you can switch to actual expenses in a later year — but if you start with actual expenses, you generally cannot switch to the standard mileage rate for that vehicle.
You cannot use the standard mileage rate if you:
- Previously claimed Section 179 deduction or bonus depreciation on the car
- Operate 5 or more vehicles simultaneously (like a fleet)
- Are a leasing company
Also, regardless of which method you use, you must keep a mileage log that records the date, destination, business purpose, and miles driven for each trip. Apps like MileIQ, Everlance, or even a simple spreadsheet work fine.
Self-Employed vs. Employee: Who Can Deduct Vehicle Costs?
This is important: if you’re a W-2 employee, the 2017 Tax Cuts and Jobs Act eliminated the unreimbursed employee expenses deduction. You cannot deduct vehicle costs on your personal return for driving to client sites, sales calls, or other job-related travel — unless your employer reimburses you.
If you’re self-employed, a sole proprietor, or run a single-member LLC, you deduct vehicle costs on Schedule C. S-corp shareholders who own vehicles personally and use them for business generally need to be reimbursed by the corporation through an accountable plan to get any deduction.
How to Calculate and Compare
Before picking a method, run the numbers for both. Here’s a quick comparison example:
Scenario: You drove 15,000 business miles out of 20,000 total miles (75% business use). Your total car expenses were $12,000.
- Standard mileage: 15,000 × $0.70 = $10,500
- Actual expenses: 75% × $12,000 = $9,000
In this case, standard mileage saves more. But if total car expenses were $16,000 instead, actual expenses would win: 75% × $16,000 = $12,000 vs. $10,500.
Tracking Mileage: The Non-Negotiable Part
The IRS requires contemporaneous records — meaning you need to log your mileage as you drive, not reconstruct it at tax time. A mileage log needs to show:
- Date of each trip
- Starting and ending location
- Business purpose
- Number of miles driven
Regular commuting from home to a fixed office is not deductible. However, driving from home to a client site when you don’t have a fixed office, or driving between two job sites, usually is.
Bottom Line
For most self-employed people with moderate mileage and an average car, the standard mileage rate is simpler and often produces a larger deduction. For high-cost vehicles or high-maintenance cars, actual expenses can be the better choice. Run both calculations in your first year of business driving and pick whichever gives you the bigger deduction — then stick with it unless your situation changes significantly.
When in doubt, a CPA can run the comparison for you. The difference between methods can easily be $1,000–$3,000 per year, so it’s worth getting right.