Business Use of a Personal Vehicle: Standard Mileage Rate vs. Actual Expenses

A business owner who uses a personal vehicle for business purposes can deduct the business-use portion of vehicle expenses. The IRS provides two methods: the standard mileage rate and the actual expense method. The choice affects how much you deduct, what records you keep, and what happens when you sell or trade in the vehicle.

Which method produces a larger deduction?

What records does the IRS require?

Under IRC 274(d), vehicle expenses are subject to strict substantiation requirements. The taxpayer must maintain a contemporaneous record (log) of:

1. Date of each business trip
2. Destination (name and address of the client, job site, or business location)
3. Business purpose (client meeting, supply pickup, job site visit)
4. Mileage (odometer start and end, or trip mileage)

The IRS doesn’t accept estimates, reconstructed logs, or calendar-based approximations as substantiation. A mileage tracking app (MileIQ, Everlance, Hurdlr) that records trips automatically with GPS satisfies the contemporaneous requirement.

Without a log, the entire vehicle deduction is disallowed on audit. This is one of the most commonly adjusted items in IRS examinations of Schedule C filers.

What records does the IRS require to support a vehicle deduction?

The IRS requires a contemporaneous written record (a mileage log kept at or near the time of each trip) that includes the date, destination, business purpose, and miles driven. A mileage log reconstructed from memory at year-end does not meet the contemporaneous requirement and will not survive an audit. Mobile apps that use GPS to auto-track trips satisfy the IRS requirements as long as you classify each trip as business or personal. For the standard mileage rate (67 cents per mile in 2024), the log is your only substantiation. For the actual expense method, you need the log plus receipts for gas, insurance, repairs, and depreciation, along with the total miles driven during the year to calculate the business-use percentage. Commuting miles (home to your regular place of business) are never deductible.

Should I use the standard mileage rate or actual expense method for my vehicle deduction?

The standard mileage rate (67 cents per mile in 2024) is simpler and works well for fuel-efficient vehicles with low maintenance costs. The actual expense method tracks every vehicle cost and multiplies the total by your business-use percentage. Actual expenses include gas, oil, tires, repairs, insurance, registration, lease payments (or depreciation for owned vehicles), parking, and tolls. If you own an expensive vehicle or one with high maintenance costs, actual expenses often produce a larger deduction. For a basic sedan driven primarily for business, the standard rate is usually more advantageous. You must choose the standard mileage rate in the first year the vehicle is available for business use; after that, you can switch to actual expenses in any subsequent year. If you start with actual expenses and claim accelerated depreciation, you cannot switch to the standard rate for that vehicle. Regardless of method, you must keep a contemporaneous mileage log documenting the date, destination, business purpose, and miles driven for each business trip.

Related guides:

• Vehicle Deductions for Real Estate Agents: Mileage vs. Actual Expenses

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.