Standard mileage rate vs actual expenses
Two ways to deduct the same car. The choice you make in the first year limits what you can do later.
The standard mileage rate
You multiply business miles by the IRS rate per mile for the year. The rate is meant to cover gas, oil, maintenance, repairs, tires, insurance, registration and depreciation. On top of it, you can still deduct business parking and tolls, and the business part of interest on a car loan if you are self-employed. The record keeping is light: a mileage log and those receipts.
Actual expenses
You add up what the car really cost in the year (gas, oil, repairs, tires, insurance, registration, lease payments or depreciation, loan interest) and multiply by the business-use percentage: business miles divided by total miles. You still need the mileage log for the percentage, and you need receipts for everything.
Example with made-up numbers
Business miles 6,000 of 15,000 total → business use 40%
Actual costs: gas 2,100 · insurance 1,400 · repairs 600 · registration 200 · depreciation 3,200 = 7,500
Actual method: 7,500 × 40% = 3,000
Standard method: 6,000 × the year's rate, plus parking and tolls
Compare the two with the rate for your year
Which wins depends on the car. An expensive or new car with high depreciation, or a car with high running costs and few total miles, tends to favor actual expenses. An efficient, older car driven many business miles tends to favor the standard rate.
The first-year rule
To use the standard mileage rate for a car you own, you must choose it in the first year you use that car for business. After that, you can switch between methods year to year (with straight-line depreciation if you move to actual expenses). If you start with actual expenses and an accelerated depreciation method, you cannot switch that car to the standard rate later. For a leased car, choosing the standard rate means using it for the entire lease.
In practice, many people choose the standard rate in year one to keep the option open, unless the actual method is clearly much larger.
Other limits
- The standard rate cannot be used if you operate five or more cars at the same time, such as a fleet.
- Depreciation on cars is subject to yearly caps, and selling a car you depreciated can have tax consequences.
- Personal use is never deductible under either method; that is what the business percentage is for.
Other mileage rates
Separate rates apply to medical driving and to driving for a charity, and those are deducted only if you itemize. The charitable rate is set by law at 14 cents per mile and does not change each year.
How to decide
- Log every business trip and the year's total miles.
- Keep every car receipt for the year, even if you plan to use the standard rate.
- At year end, work out both numbers.
- Pick the larger one, within the first-year and switching rules.
Get the standard-rate number with the free mileage deduction calculator, which also shows your business-use percentage. The log itself is covered in mileage log template for the IRS.
Frequently asked questions
Is it better to take standard mileage or actual expenses?
It depends on the car. High depreciation or high costs with few total miles tend to favor actual expenses; an efficient car with many business miles tends to favor the standard rate. Work out both.
Can I switch from actual expenses to standard mileage?
Only if you used the standard rate in the first year the car was used for business. Starting with actual expenses and accelerated depreciation rules out the standard rate for that car.
Can I deduct parking and tolls with the standard mileage rate?
Yes. Business parking and tolls are deducted on top of the standard mileage amount.
General information, not financial, tax or legal advice. Examples use made-up numbers.
Mileage Log 2027
Log every trip with date, purpose and miles, with the IRS rate applied by date and a year-end total.