Business vehicle deductions allow you to write off the cost of using your car, truck, or van for business purposes using either the standard mileage rate (67 cents per mile for 2024, 70 cents per mile for 2025) or the actual expense method tracking gas, insurance, repairs, and depreciation. You cannot deduct commuting miles — only trips between business locations, to clients, or for business errands. Tax Sherpa recommends comparing both methods annually, as the better option changes depending on your vehicle costs and mileage volume.
Key Takeaways
- Two methods: Standard mileage rate (67¢/mile for 2024) or Actual expenses (gas, insurance, repairs, depreciation × business %)
- Commuting is never deductible — driving from home to your regular workplace doesn't count
- You must choose standard mileage in the first year you use a vehicle for business to preserve that option
- Parking fees and tolls are deductible in addition to either method
- A mileage log is required — the IRS wants date, destination, business purpose, and miles for each trip
Standard Mileage Rate vs. Actual Expenses
Feature | Standard Mileage Rate | Actual Expense Method |
2024 rate | 67 cents per mile | N/A — based on actual costs |
2025 rate | 70 cents per mile | N/A — based on actual costs |
What it covers | Gas, oil, repairs, insurance, depreciation, registration | You track each expense individually |
Record-keeping | Mileage log only | Mileage log + all vehicle expense receipts |
Best for | High mileage, lower-cost vehicles | Expensive vehicles, low mileage, high repair costs |
Example: 12,000 business miles in a year
- Standard mileage: 12,000 × $0.67 = $8,040
- Actual expenses: $6,000 gas + $1,800 insurance + $2,000 repairs + $3,000 depreciation = $12,800 total × 60% business use = $7,680
In this case, standard mileage wins. But if your vehicle has higher costs or lower business-use percentage, actual expenses might be better.
What Miles Are Deductible?
Trip Type | Deductible? |
Home to client site | Yes |
Office to client site | Yes |
Home to regular office (commuting) | No |
Between two business locations | Yes |
Business errands (bank, post office, supplies) | Yes |
Home office to any business destination | Yes (home office = business location) |
Pro tip: If you have a qualifying home office, every trip from home for business is deductible — because your home IS your business location. This can add thousands in deductible miles.
Record-Keeping Requirements
The IRS requires a contemporaneous mileage log with:
- Date of each trip
- Destination (where you went)
- Business purpose (why the trip was for business)
- Miles driven (odometer readings or GPS tracking)
Tools that make this easy: MileIQ is our top recommendation at Tax Sherpa — it runs in the background, auto-classifies trips, and produces an IRS-ready report. Everlance and Driversnote are solid alternatives. A simple spreadsheet works too, but you'll use it less consistently.
"Contemporaneous does not mean December 31st. It means you log the trip when it happens — that day or the next. Reconstructing a year's worth of mileage from memory at tax time is not contemporaneous. The IRS knows the difference, and so do we." — Neal McSpadden, Tax Sherpa
Record-keeping is where most people fail. Not because they drove the miles or lack the business purpose — they just didn't log it in real time. That's a fixable problem if you install MileIQ today and let it run.
Neal's Practitioner Insight: How to Pick the Right Method
Here's the quick heuristic we use at Tax Sherpa after reviewing thousands of vehicle deductions:
Older car → Standard mileage rate usually wins. If your vehicle is several years old, actual expenses are often modest — lower insurance premiums, a fully-depreciated asset, repairs that may or may not qualify. The standard rate typically comes out ahead because it bakes in a depreciation component even when the car's book value is near zero.
Newer car → Actual expenses are likely better. A new or late-model vehicle has higher insurance costs, a large depreciable basis, and potentially full Section 179 or bonus depreciation in year one. Actual expenses will almost always outperform the flat-rate mileage calculation when you have a significant asset to depreciate.
Run the numbers every year. The IRS lets you switch methods (with some restrictions), so if your situation changes — new vehicle, high repair year, change in business-use percentage — it's worth recalculating. Tax Sherpa does this comparison automatically as part of every tax planning engagement.
"Most people pick a method once and never think about it again. That's leaving money on the table. A car you bought three years ago may have flipped from 'actual is better' to 'standard is better' without you realizing it." — Neal McSpadden
Section 179 and Vehicle Depreciation
If you purchase a vehicle for business use, you may be able to deduct a significant portion (or all) of the cost in the first year:
- Section 179: Deduct the full purchase price of qualifying vehicles (up to $1,220,000 total Section 179 in 2024)
- SUV limitation: Vehicles over 6,000 lbs GVWR have a $30,500 Section 179 cap (2024)
- Heavy vehicles (over 6,000 lbs GVWR): Can deduct up to $30,500 Section 179 + 60% bonus depreciation on remainder
- Passenger vehicles under 6,000 lbs: Limited to $20,400 first-year depreciation (2024)
Frequently Asked Questions
Can I deduct mileage if I don't have an LLC?
Yes. Vehicle deductions are based on business use, not entity type. Sole proprietors claim vehicle expenses on Schedule C just like any other business entity.
Can I deduct both mileage and actual expenses?
No. You must choose one method per vehicle per year. However, parking and tolls are deductible regardless of which method you choose.
What if I use my car for both personal and business?
You only deduct the business portion. If 60% of your miles are for business, you deduct 60% of actual expenses or claim the standard rate only on business miles.
Get help maximizing your vehicle deductions → Book a Tax Sherpa consultation