When it comes to understanding vehicle business expense deduction, knowing the IRS rules is essential. If you use your car for business, you’re sitting on a significant tax deduction. In 2025, the IRS standard mileage rate is 70¢ per mile — that’s $7,000 for every 10,000 business miles. Here’s how to claim this deduction the right way.
Two Methods for Deducting Your Vehicle
The IRS lets you choose between two approaches each year (with some limitations on switching):
Method 1: Standard Mileage Rate
Multiply your business miles by the IRS rate:
- 2025 rate: 70¢ per mile (check IRS.gov for current rates)
- 2024 rate: 67¢ per mile
Example: 12,000 business miles × 67¢ = $8,040 deduction
The standard mileage rate covers gas, depreciation, maintenance, and insurance — all rolled into one number. All you need to track is your mileage. Use our mileage deduction calculator to see your deduction instantly.
On top of the mileage rate, you can still deduct parking fees and tolls separately — they’re not included in the per-mile rate.
Method 2: Actual Expense Method
Track every vehicle expense and multiply by your business-use percentage:
- Gas and oil
- Insurance
- Registration and taxes
- Repairs and maintenance
- Lease payments
- Depreciation (if you own the vehicle)
Example: Total vehicle costs: $14,000/year. Business use: 60%.
Deduction: $14,000 × 60% = $8,400
Which Method Wins?
It depends on your situation. The actual expense method tends to win for:
- High-value vehicles (luxury, trucks, SUVs)
- High business-use percentage (70%+ for business)
- Vehicles with high insurance, fuel, or maintenance costs
The standard mileage rate tends to win for:
- Older, paid-off vehicles with lower running costs
- Moderate business use (under 60%)
- People who prioritize simplicity and minimal recordkeeping
The only way to know for certain is to calculate both. Important: If you want the option to use actual expenses in a future year, use the actual method from the first year you put the vehicle in service. Once you start with the standard mileage rate on a purchased vehicle, you can generally switch to actual expenses — but not vice versa for leased vehicles.
Mileage Tracking Tips
The IRS requires a contemporaneous mileage log — meaning you should record trips as you make them, not reconstruct them later. At a minimum, log:
- Date of each trip
- Business purpose
- Starting and ending odometer readings (or miles driven)
- Destination or client visited
Free apps like MileIQ, Stride, or Everlance automatically track your trips using GPS. They take minutes to set up and can save you thousands at tax time.
For more tax guidance, see our guides on self-employed tax deductions checklist and business meal deductions. For official IRS information, visit the IRS Topic 510 on business use of car.
What Counts as a “Business Mile”?
Business miles include driving to:
- Client sites, meetings, or job locations
- The bank, post office, or supply store for business purposes
- A coworking space (if it’s your regular place of business)
- Business networking events or conferences
Commuting from home to your regular office does not count — but if you have a qualified home office, trips from home to clients and meetings become business miles, not commuting.
Full guide: Vehicle deduction: standard mileage vs actual expenses →
This article is for educational purposes only. Consult a tax professional for advice specific to your situation.