Standard Mileage Rate vs Actual Car Expenses: Which to Use

Standard mileage rate vs actual car expenses: how do they differ?

A self-employed person deducts business driving one of two ways. The standard mileage rate multiplies business miles by a rate the IRS sets. Actual expenses deduct the business share of what the car costs to own and run. A mileage log is not a third method: both methods need one, and actual expenses also need records for each cost, with receipts or other documentary evidence where required (Tax Topic 510; Publication 463).

For a car you own, the first year it is available for business decides what stays open. Take the standard rate that year and both methods stay open later. Take actual expenses with MACRS (the usual way cars are depreciated), Section 179 or bonus depreciation (both deduct much of the cost in the first year) and the standard rate is closed for that car for good.

The business rate changed during the tax year, and each business mile uses the rate for the date it was driven, so the log needs a date for every trip (IRS rates; Announcement 2026-11).

What makes a case not simple

• You already bought the car, or a prior preparer or software already picked a method: the answer depends on what the earlier returns claimed, not on what you would choose now. Depreciation on the car (Form 4562 or Schedule C line 13) means that year used actual expenses.
• A leased car stays on the method chosen for the whole lease, renewals included.
• Five or more cars used at the same time cannot use the standard rate.

Gather: the purchase date and price or the lease agreement, the date the car first became available for business (and its value that day, if it was a personal car before), odometer readings at the start and end of the year, the business-miles log, receipts, parking and toll records, and the prior years' returns.

Does the standard mileage rate already cover gas, repairs, insurance and cleaning?

For the costs the IRS names, yes. Cleaning is not named, and nothing in the rule adds it on top of the rate. The rate takes the place of the car's ownership and operating costs for the year, so none of them can be deducted again. The IRS names depreciation or lease payments, maintenance and repairs, tires, gasoline including gas taxes, oil, insurance, and license and registration fees (Revenue Procedure 2019-46, section 4.02; Publication 463).

That list is introduced with "items such as", so it is not closed. Neither it nor Publication 463's list of actual expenses names a car wash, cleaning or detailing; the IRS text is silent on them. The rate stands in for the car's costs, and only parking, tolls, loan interest and personal property tax are allowed on top, so treat cleaning as part of actual expenses, never an add-on to the rate. Repairs likewise count separately only in a year you use actual expenses.

What can I add to the standard mileage rate?

Four items are deductible on top of the rate (Revenue Procedure 2019-46, section 4.03; Publication 463; Instructions for Schedule C).

Sales tax paid when you bought the car is part of its cost, not a separate deduction.

What counts as actual car expenses, and how is the business share worked out?

Actual expenses are the costs of running and owning the car, multiplied by the business share of the driving. The business share is business miles divided by total miles for the year. Commuting and personal miles count in the total but not in business miles (Publication 463).

The costs that count are gas, oil, tires, repairs, garage rent, insurance, registration fees and licenses, depreciation or the business share of lease payments, parking and tolls, and the business share of loan interest and personal property tax. Traffic fines are not deductible.

The car's purchase price is recovered through depreciation, Section 179 or bonus depreciation, not deducted as an operating cost. If a personal car moves into the business, depreciation starts from the lower of its adjusted basis or its fair market value on that date, not the original price. Section 179 and bonus both need business use above 50% (Publication 463; Publication 946). If business use falls to that level or below in a later year of the recovery period, the depreciation taken above straight line, Section 179 included, is added back to income, the car's basis goes up by that amount, and depreciation is straight line from then on (Publication 463).

For a car, truck or van at or under 6,000 pounds, a yearly cap limits all depreciation together, including Section 179 and bonus. For a car placed in service this tax year, the first-year cap is $20,300 when bonus depreciation applies and $12,300 when it does not, reduced for personal use (Revenue Procedure 2026-15; Publication 463). Heavier vehicles follow different rules: see Buying a vehicle through your business or personally.

Which method gives the bigger deduction?

Neither wins every time, so figure both before filing the first return for the car (Tax Topic 510). The standard figure is business miles times the rate. The actual figure is the business share times the sum of running costs and depreciation or lease payments. Parking, tolls, interest and tax are added under both methods, so leave them out of the comparison.

The rate is an average, set from an annual IRS-commissioned study of the fixed and variable costs of operating a car (Notice 2026-10, section 2). Your own costs can be above or below it. Insurance, registration and depreciation change little with mileage, so a low-mileage, high-cost car can come out ahead under actual expenses. Gas and tires rise with each mile, so a high-mileage, modest-cost car can come out ahead under the standard rate.

The first-year number is not the whole choice. Actual expenses in the first year mean depreciation, with its yearly cap, and they close the standard rate for that car. Compare the years you expect to keep the car, not only the first.

Can I switch between standard mileage and actual expenses later?

Sometimes. For a car you own, the first year it is available for business use decides what stays open (Publication 463; Tax Topic 510).

The standard rate is chosen on the return for the first year, by its due date including extensions, and the choice cannot be revoked. It counts as electing the car out of MACRS (Publication 946). Switching to actual expenses in a later year therefore has two effects:

• Depreciation must be straight line (the same amount each year) over the car's remaining estimated useful life, still within the yearly cap, not MACRS.
• The basis you depreciate (what the car counts as costing you for tax) is reduced by the per-mile depreciation amounts for every mile driven at the standard rate.

Years you use actual expenses carry no per-mile reduction (Publication 463; Revenue Procedure 2019-46, section 4.05).

I took Section 179 or bonus depreciation on the car: can I go back to the standard rate?

No, not for that car. A car with a Section 179 deduction, bonus depreciation (the special depreciation allowance), MACRS, or any depreciation other than straight line over its useful life is closed to the standard rate in every later year (Publication 463; Revenue Procedure 2019-46, section 4.05).

• Actual expenses in the first year bring bonus depreciation automatically when the car qualifies, unless you elect out on a timely filed return (Tax Topic 510; Publication 463). Electing out does not reopen the standard rate, because MACRS still applies. How the election works, and what else it covers, is in Writing off equipment in the first year.
• A different car gets its own first-year choice.
• Prior returns show what was claimed. MACRS, Section 179 or bonus depreciation on this car, on Form 4562, Part V, or Schedule C line 13, means the car is already closed to the standard rate.

What if the car is leased?

For a leased car, the standard rate is allowed only if you use it for the entire lease period, renewals included. Deducting actual lease payments closes the standard rate for that lease (Revenue Procedure 2019-46, sections 3.05 and 4.05; Instructions for Schedule C).

Under actual expenses, deduct the business share of each lease payment, never the commuting or personal share. Spread any advance payment over the lease. Payments that buy the car are not lease payments. On a lease of 30 days or more that begins this tax year, a car worth more than $62,000 at the start reduces the lease deduction by an inclusion amount (Revenue Procedure 2026-15; Publication 463).

When is the standard mileage rate not allowed?

Not for any of your cars if you own or lease five or more cars and use them at the same time, as in a fleet, including cars your employees use. Use actual expenses for all of them. Cars you alternate, using them at different times, do not count together. Publication 463's examples: a salesperson who alternates three cars and two vans can use the rate for all five, but a business with a car and four vans in use at once cannot use it for any (Publication 463).

The standard rate is also closed for a car that has had depreciation other than straight line, MACRS, Section 179 or bonus depreciation, and for a leased car once actual lease payments are deducted.

What does the standard mileage rate do to the car's basis when I sell it?

Each business mile at the standard rate lowers the car's tax basis by a set amount treated as depreciation, so the depreciation built into the rate is not deducted twice. Multiply each year's standard-rate business miles by that year's amount, add the years together, and subtract the total from the car's basis, but not below zero (Revenue Procedure 2019-46, section 4.04; Publication 463).

Announcement 2026-11 raises the rate but keeps every other provision of Notice 2026-10 in effect, including this amount (Notice 2026-10, section 4; Announcement 2026-11). Earlier years are in the "Rate of Depreciation Allowed in Standard Mileage Rate" table in Publication 463.

Years on actual expenses get no per-mile reduction; basis falls by the depreciation claimed or allowable instead. If basis reaches zero and you keep the car in business, use the full rate with no reduction. On a sale, compare the price with the reduced basis; the part of any gain due to depreciation is ordinary income (Publication 463).

What records does each method need?

Both methods need a log of business miles and the facts about the car. Actual expenses add records for each cost, with receipts or other documentary evidence where required (Publication 463).

Keep records at least 3 years from the date you file (a return filed early counts as filed on its due date), and keep business-use records for every year of the car's recovery period. Keep the car's cost, improvement and depreciation records until the time limit ends for the year you sell it (IRS: How long should I keep records?). The vehicle questions (date placed in service; business, commuting and other miles; written evidence) go on Form 4562, Part V if you claim depreciation on the car or must file that form for another reason. Otherwise they go on Schedule C, Part IV, when you use the standard rate, lease the car or it is fully depreciated (Instructions for Schedule C; Schedule C).

For what a log must show, see Mileage log requirements. If you have no log, see Rebuilding a mileage log.

Example

These examples are illustrative; figures are in US dollars.

Comparing both methods before the first return

A sales rep starts using a newly bought car for work. Of 15,000 total miles in the year, 12,000 are business: 80%. Assume 6,000 business miles fall in each half of the year.

• Standard rate: 6,000 miles at 72.5 cents plus 6,000 miles at 76 cents is US$4,350 + US$4,560 = US$8,910, plus parking and tolls.
• Actual expenses: 80% of US$8,000 in gas, insurance, repairs and registration is US$6,400, plus 80% of the car's depreciation.

The standard figure is ahead by US$2,510 before depreciation. Actual expenses come out higher only if the business share of depreciation is more than that. For a newly bought car the first-year depreciation allowance can easily exceed that gap, so later years, and losing the standard rate, matter as much as year one. Taking that depreciation with MACRS, Section 179 or bonus closes the standard rate for this car in every later year. She computes both before filing.

A truck expensed in year one

A contractor buys a US$40,000 work truck, uses it only for business, and expenses it with Section 179. Assume the truck qualifies and is a pickup with a 6-foot bed and a rating over 6,000 pounds, so neither the passenger-car cap nor the heavy-SUV limit applies (see Buying a vehicle through your business or personally).

• Year one: actual expenses. The standard rate is now closed for this truck.
• Years two to five: actual expenses again, even in a year when the contractor drives so many miles that the rate would have been larger.
• Sale: any gain up to the depreciation taken is ordinary income.

A leased car

A consultant leases a car and takes the standard rate in the first year.

• Year one: standard rate.
• Year two: standard rate again; actual lease payments are no longer an option for this lease.
• Year three, lease renewed: still the standard rate, because the renewal is part of the same lease period.

Had she deducted the business share of her lease payments in year one, the standard rate would have been closed for the whole lease.

Different for you?

• You bought a vehicle, or a prior preparer or software already picked a method: the first-year choice decides what is open for that car in every later year. Gather the purchase date and price, the first business-use date, odometer readings, receipts and prior returns. A preparer needs these to read which method is still open for the car: individual tax help.
• You took Section 179 or bonus depreciation on the car: the standard rate is closed for that car. See Writing off equipment in the first year for how those deductions work, and individual tax help if prior years need checking.
• A filed return used a method that was not open for the car, or you cannot tell which it used: the earlier years may need correcting. See Amending a return for business expense mistakes, and get individual tax help to read the car's history first.
• You use five or more vehicles at once, or several cars across several years: five at once rules out the rate for all of them, while cars you alternate or replace do not count together and each has its own first-year choice. Keep miles and costs by vehicle; for set-up, get bookkeeping help.
• You never filed some years, or your records are missing: the books come first, then the returns. See Rebuilding books from bank statements for the books and Rebuilding a mileage log for the miles. For the catch-up, see bookkeeping help; for the filings, individual tax help. Each back year uses that year's rate from the IRS rate table, and the first-year choice for the car still decides what is open. If that first year's return was late or never filed, the IRS sources tie the choice to its due date and do not say whether the standard rate can still be chosen, so a preparer should read the facts first.
• You bought the vehicle through an LLC or S corporation, or it weighs more than 6,000 pounds: see Buying a vehicle through your business or personally.
• Your S or C corporation pays you for driving your own car: the company's repayment rules decide that, not Schedule C. See Reimbursing owner expenses (S corporation) and C corporation paying owner expenses (C corporation).
• You drive for a rideshare or delivery platform: see Rideshare and delivery driver deductions.
• You need to record a partly personal car expense in your books: see Mixed-use expenses and business percentage.
• You drive for an employer and are not reimbursed: the business rate generally cannot be used for unreimbursed employee driving, apart from a few groups such as Armed Forces reservists and certain performing artists (Notice 2026-10, section 3).