Vehicle & Mileage
Your vehicle is one of the easiest deductions to get wrong, because the line between business and personal driving is blurry and the rules on which method you can use are strict. This guide covers the two calculation methods, how to handle a mixed-use vehicle, and what your mileage log needs to contain.
01Standard mileage vs. actual expenses
There are two ways to deduct vehicle costs. The standard mileage rate multiplies your business miles by a flat cents-per-mile rate set by the IRS each year. See the current rate on IRS.gov.
The actual expense method adds up everything the car costs to run (gas, maintenance, insurance, registration, and depreciation) and deducts the business-use percentage.
If you own the car, you must choose the standard mileage rate in the first year you use it for business to keep the option to switch methods later. If you lease the car, you must use the same method for the entire lease, including renewals.
02Mixed-use vehicles
Most small business vehicles are driven for both business and personal reasons. Only the business-use portion is deductible, so you need to track the split.
Your commuting miles, driving from home to a regular workplace, are never deductible. Driving between job sites, to clients, or to the bank and supply store is business mileage. Calculate your business-use percentage by dividing business miles by total miles for the year.
03Mileage log requirements
The IRS wants a contemporaneous mileage log, one kept near the time of the trip, not reconstructed at year-end. For each business trip, record the date, the miles driven, the destination, and the business purpose.
A paper notebook, a spreadsheet, or a mileage app all work. Back it up with calendar entries, appointment records, or fuel receipts.
Records checklist
A summary of every record mentioned on this page. Keep these with your tax return.
- Mileage logDate, miles, destination, and business purpose for each business trip, kept contemporaneously.
- Total annual milesOdometer readings at the start and end of the year.
- Business-use percentageBusiness miles divided by total miles.
- Actual expense receiptsGas, maintenance, insurance, registration, and lease payments (actual expense method only).
- Depreciation recordsBasis and depreciation schedule for the actual expense method.
Go deeper on the rules behind these deductions
Educational guidance only, not tax advice. Talk to a tax professional about your situation.