Standard mileage method vs actual expense method
With the standard mileage method, you deduct a fixed rate per business mile (72.5 cents through June 30, 2026, and 76 cents from July 1) plus parking and tolls. With the actual expense method, you deduct the business share of what the car really cost: gas, repairs, insurance, depreciation, and more. For a car you own, you must use the standard rate in the first year to keep the option of using it later.
On this page (8 sections)
Both methods go on the same line of your return: Schedule C, line 9, “car and truck expenses.” This is not tax advice; the rules here are from IRS Publication 463, chapter 4, and the Schedule C instructions.
The two methods in one table
| Standard mileage method | Actual expense method | |
|---|---|---|
| What you deduct | Business miles × IRS rate | Business-use % × total car costs |
| Gas, oil, repairs, insurance, registration | Included in the rate | Deducted, business share |
| Depreciation or lease payments | Included in the rate | Deducted, business share, within IRS limits |
| Parking and tolls for business trips | Added on top | Added on top |
| Records you need | Mileage log | Mileage log and every receipt |
| Best for | Cheaper cars, high mileage, simple records | Costly cars, high costs per mile, lower mileage |
Either way, you need a mileage log. The standard method uses it for the deduction itself. The actual expense method uses it to find your business-use percentage. Publication 463’s own example: a contractor drives 20,000 miles, 12,000 for business, so 60% (12,000 ÷ 20,000) of the car’s costs are business costs.
The first-year rule (and when you can switch)
- A car you own: to use the standard mileage rate, you must choose it in the first year the car is available for use in your business. In later years, you can pick either method each year.
- From standard to actual: allowed in a later year. You must then use straight-line depreciation over the car’s estimated remaining useful life, within the yearly depreciation limits.
- From actual to standard: not allowed if you used actual expenses in the first year. You also can’t use the standard rate for that car if you ever claimed accelerated (MACRS) depreciation, a section 179 deduction, or the special depreciation allowance on it.
- A leased car: if you choose the standard rate, you must use it for the whole lease, including renewals.
- Deadline: you make the choice by the due date of your return, including extensions, and you can’t revoke it for that year.
In practice: if you are unsure, start a new business car on the standard rate. That keeps both options open for later years.
When you can’t use the standard rate
Publication 463 rules out the standard mileage rate if you:
- use five or more cars at the same time, as in a fleet (cars you alternate between don’t count as “at the same time”);
- claimed depreciation on the car with any method other than straight line, including MACRS;
- claimed a section 179 deduction or the special depreciation allowance on the car;
- claimed actual expenses after 1997 for a car you lease.
Cars used for hire, such as taxis, can use the standard rate unless one of these rules applies. If you drive a car your employer provides, you can’t use the standard rate at all.
Worked example: same car, both methods
A freelance designer drives 15,000 miles in 2026. Her log shows 9,000 business miles: 4,500 before July 1 and 4,500 from July 1. Business use is 60% (9,000 ÷ 15,000).
| Miles | Rate | Amount |
|---|---|---|
| 4,500 (Jan. 1 – June 30) | 72.5¢ | $3,262.50 |
| 4,500 (July 1 – Dec. 31) | 76¢ | $3,420.00 |
| Total | — | $6,682.50 |
| Cost for the year | Total | Business share (60%) |
|---|---|---|
| Gas | $1,950 | $1,170 |
| Insurance | $1,500 | $900 |
| Repairs and maintenance | $850 | $510 |
| Tires | $600 | $360 |
| Registration | $250 | $150 |
| Subtotal, before depreciation | $5,150 | $3,090 |
Parking and tolls are the same under both methods, so leave them out of the comparison. The actual expense method wins only if the business share of depreciation (or lease payments) is more than $3,592.50 ($6,682.50 − $3,090). For an older car with little value left to depreciate, it often isn’t. For a new, costly car, it may be, especially in the first years. Run both numbers before you file.
To see your own cost per mile from gas alone, try the gas cost per mile calculator. To have the actual costs ready, keep receipts in a car maintenance log through the year.
Depreciation in both methods
Standard mileage method. Part of each business mile counts as depreciation, and it lowers your car’s tax basis. That matters when you sell the car or switch to actual expenses. The IRS amounts (Notice 2026-10, section 4):
| Year | 2023 | 2024 | 2025 | 2026 |
|---|---|---|---|---|
| Basis reduction | 28 | 30 | 33 | 35 |
In the example above, 9,000 business miles in 2026 × $0.35 = $3,150 comes off the car’s basis.
Actual expense method. Cars are 5-year property under MACRS, the IRS depreciation system. Because of the half-year convention, the cost is spread over 6 calendar years. Yearly limits cap the depreciation on passenger cars. If business use is 50% or less, you can’t take a section 179 deduction or the special allowance, and you must use straight-line depreciation. If business use later falls to 50% or less, you may have to pay back (recapture) excess depreciation. The current limits are in Publication 463, chapter 4, under “Depreciation Limits.”
Schedule C car and truck expenses
- Standard rate: business miles × rate, plus parking and tolls, on line 9. Don’t deduct depreciation, lease payments, or operating costs for that car.
- Actual expenses: the business share of gas, oil, repairs, insurance, license plates, and similar costs on line 9; depreciation on line 13; lease or rent payments on line 20a.
- Vehicle information: Part IV of Schedule C (date placed in service, business, commuting, and other miles), or Form 4562, Part V, if you file Form 4562.
- With either method: the business part of car loan interest and of state and local personal property tax on the car can also be deducted.
How to add up the miles is in how to track mileage for taxes, and who can claim the deduction at all is in the mileage deduction guide.
FAQ
Can I switch from the standard mileage rate to actual expenses?
Yes, in a later year. From then on, you depreciate the car with the straight-line method over its estimated remaining useful life, within the yearly limits, and your basis is already lower by the depreciation part of the miles you claimed.
Can I switch from actual expenses to the standard mileage rate?
Only if you used the standard rate in the car’s first year of business use and never claimed accelerated depreciation, section 179, or the special allowance on it. If you started with actual expenses, you stay with them for that car.
Can I use the standard mileage rate for a leased car?
Yes, but then you must use it for the entire lease period, including renewals. If you deduct actual lease payments instead, you can’t switch to the standard rate later for that lease.
Can I deduct parking and tolls with the standard mileage rate?
Yes. Business parking fees and tolls are deducted on top of the standard rate. Parking at your regular place of work is a commuting cost and isn’t deductible.
Can I deduct car loan interest with the standard mileage rate?
If you are self-employed, yes: the business part of the interest. For example, at 60% business use you deduct 60% of the interest on Schedule C.
Sources
- IRS, Publication 463, chapter 4 (standard mileage rate, actual car expenses, depreciation): irs.gov
- IRS, Instructions for Schedule C (Form 1040), line 9 and Part IV: irs.gov
- IRS, Notice 2026-10 (2026 rates and depreciation per mile, 2022–2026): irs.gov (PDF)
- IRS, Announcement 2026-11 (rates from July 1, 2026): irs.gov