Vehicle Mileage Deduction: Standard Rate vs. Actual Expenses

Two Methods, One Decision

The IRS allows two methods to deduct vehicle business use under IRC §162 and §274(d): the standard mileage rate and the actual expense method. You must choose at the time you first place a vehicle in service for business use, and the choice has lasting consequences.

Standard Mileage Rate

The standard rate covers gas, insurance, depreciation, repairs, and all other vehicle costs — you do not deduct those separately. You add parking fees and tolls on top of the standard mileage rate.

Pros: Simple. Just track miles. No receipts for gas or repairs. Works well for fuel-efficient vehicles or lower-mileage situations.

Cons:Can underperform actual expenses for large vehicles, heavy depreciation-eligible vehicles (trucks, SUVs > 6,000 lbs), or high-fuel-cost vehicles.

Actual Expense Method

Track all vehicle costs (gas, oil, repairs, insurance, registration, depreciation or lease payments) and deduct the business-use percentage. If you drive 20,000 miles total and 15,000 are business miles, your business-use percentage is 75%.

Pros:Often better for SUVs, trucks, and vehicles with high ownership costs. Bonus depreciation under IRC §168(k) can accelerate deductions in year one. Heavy vehicles (GVWR > 6,000 lbs) have more favorable depreciation limits.

Cons: Requires tracking all receipts. More complex. If you switch from actual to standard in a later year, depreciation recapture rules apply.

What Counts as Business Miles

• Yes: Client visits, business errands, driving between job sites, picking up supplies, attending industry conferences
• Yes: If you have a home office, driving from home to a client (your home office is your regular place of business)
• No: Commuting from home to your principal office (unless home office qualifies under §280A)
• No: Personal errands, even if you had a business errand on the same trip

Mileage Log Requirements

Under IRC §274(d), vehicle expenses require "adequate records" — the contemporaneous mileage log is the IRS standard. Each entry must include: date, business purpose, destination, and miles driven. Apps like MileIQ, TripLog, and Everlance auto-capture trips via GPS.