Standard Mileage Rate vs Actual Expenses: Which Should You Use?

If you're self-employed and use a car for work, the IRS gives you two ways to deduct it. Picking the right one can be worth hundreds or thousands of dollars a year, and the choice you make in a car's first year can lock you in.

The two methods

Standard mileage rate

Multiply your business miles by the IRS rate. The rate is meant to cover fuel, maintenance, repairs, tires, insurance, registration and depreciation, so you don't deduct those separately. You can still deduct business parking and tolls on top.

Actual expenses

Add up what the car cost you for the year: fuel, oil, repairs, tires, insurance, registration, licenses, garage rent, lease payments, and depreciation. Then multiply by your business-use percentage (business miles ÷ total miles). If you drove 12,000 miles and 9,000 were for business, you deduct 75% of the costs.

The rules that decide for you

• Leased cars: if you choose the standard rate for a leased car, you must use it for the entire lease period, including renewals.
• Five or more cars: you can't use the standard rate if you use five or more cars for business at the same time. (Using them at different times doesn't count.)
• Depreciation history: there are further limits for cars where you've already claimed certain kinds of depreciation, such as a Section 179 deduction. Ask a tax professional if that applies to you.

Which usually comes out ahead?

There's no universal answer, but the pattern is fairly predictable:

• The standard rate tends to win for efficient, inexpensive or older cars driven a lot of miles, and for people who don't want to keep every receipt.
• Actual expenses tend to win for expensive vehicles with high depreciation, insurance or repair costs, vehicles used almost entirely for business, and vehicles driven relatively few miles.

Compare them with your own numbers

1. Log every business trip, and the odometer at the start and end of the year.
2. Log every car expense with a receipt.
3. Standard method: business miles × the rate (in 2026, split at July 1) + business parking and tolls.
4. Actual method: total costs (plus depreciation, which your tax preparer can calculate) × business-use %.
5. Compare the two, keeping the first-year rule in mind for future years.

Your real cost per mile is a good shortcut. If it's well above the IRS rate, actual expenses deserve a closer look. Here's how to calculate your cost per mile.

Keep the records for both

Even if you plan to use the standard rate, logging expenses costs little and keeps both options open in the first year. Milebook records trips, fuel, service and every other expense per vehicle, with receipt photos. Reports show business miles, total costs and cost per mile for any date range, and export to a spreadsheet for your tax preparer. See Milebook as a car expense tracker.

This article is general information, not tax advice. The right method depends on your situation; check with a tax professional.