Which method gives a bigger deduction?
It depends on your vehicle and driving. Actual expenses can help with costly vehicles, while standard mileage often wins for efficient, high-mileage driving.
Tax guide
Standard Mileage vs Actual Expenses
When you use a vehicle for business, you can deduct the cost using either the standard mileage rate or your actual expenses.
The standard mileage method lets you deduct a set amount for each business mile you drive. You simply track your business miles and multiply by the IRS rate. This method is simple and requires keeping a mileage log rather than every receipt.
The actual expense method instead adds up the real costs of operating the vehicle, such as gas, repairs, insurance, and depreciation, then deducts the business-use percentage of that total. It can produce a larger deduction for expensive vehicles but requires detailed records of all your costs.
Either way, only the business portion of your driving is deductible, not personal trips like commuting. There are rules about which method you can switch to in later years, so it helps to choose carefully when you first use a vehicle for business.
In short
Key points
- Two methods exist for deducting business vehicle use
- Standard mileage deducts a set rate for each business mile
- Actual expenses deduct the business share of real operating costs
- Only business miles count, not personal driving or commuting
- Standard mileage needs a mileage log; actual needs all receipts
- Rules limit switching methods in later years, so choose carefully
FAQ
Frequently asked questions
Can I deduct my commute to work?
No. Commuting between home and a regular workplace is personal and not deductible. Only business-related driving counts.
Do I have to keep records either way?
Yes. Standard mileage requires a log of business miles, and actual expenses require receipts for all vehicle costs. Good records protect your deduction.
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