Vehicle Deductions: Mileage vs. Actual Expense Method

The Two Methods

Standard Mileage Rate

Multiply business miles by IRS rate (currently $0.725/mile for 2026, check annually).

• Pros: Simple, no receipt tracking for gas/repairs
• Cons: May be less than actual costs, can't depreciate vehicle

Actual Expense Method

Deduct actual costs × business use percentage.

• Pros: Often higher deduction, includes depreciation
• Cons: More record keeping, need all receipts

Side-by-Side Comparison

SCENARIO: Work van, 20,000 business miles/year STANDARD MILEAGE: 20,000 miles × $0.725 = $14,500 deduction ACTUAL EXPENSE: Gas: $4,800 Insurance: $1,800 Repairs: $1,500 Tires: $800 Registration: $300 Depreciation: $6,000 Total actual: $15,200 Business use (90%): $13,680 deduction Result: Similar in this case. Actual wins with expensive vehicles or high repair years.

What Actual Expenses Include

• Gas and oil
• Repairs and maintenance
• Tires
• Insurance
• Registration fees
• Lease payments (if leased)
• Depreciation (if owned)
• Loan interest (if financed)
• Parking and tolls (business-related)

Business Use Percentage

You can only deduct the business portion.

Total miles this year: 25,000 Business miles: 20,000 Personal miles: 5,000 Business use: 20,000 ÷ 25,000 = 80% Actual expenses: $15,000 Deductible: $15,000 × 80% = $12,000

Tracking Requirements

For Standard Mileage

Keep a mileage log with:

• Date
• Destination/purpose
• Miles driven

Apps like MileIQ, Stride, or Everlance automate this.

For Actual Expenses

Keep all receipts for:

• Every fill-up
• Every repair
• Insurance statements
• Registration

Plus a mileage log to calculate business percentage.

Which Method to Choose

STANDARD MILEAGE favors: - High mileage drivers - Fuel-efficient vehicles - Low repair costs - Those who hate record keeping ACTUAL EXPENSES favors: - Expensive vehicles (more depreciation) - High repair/maintenance years - Gas-guzzlers - Those with good record keeping

Switching Methods

Important: If you use actual expense method in Year 1, you're generally locked in for that vehicle. But if you start with standard mileage, you can switch to actual later. Start with standard mileage if unsure.