Business Deductions

Business Mileage Deduction

Deducting business miles traveled for the year in your car, truck, van and SUV expenses can slash hundreds, even thousands of dollars, off your taxes!

There are two methods for figuring your business mileage deduction:
  1. Mileage Allowance
  2. Actual Expenses

Mileage Allowance

To figure your business mileage deduction you multiply business miles traveled during the year by the business mileage rate in effect for that year (rates tend to change each year). Beginning January 1, 2025, the business mileage rate for a car, van, pickup or panel truck is 70 cents per mile.

To use the standard mileage rate, you must own or lease the vehicle and:
  • You must not operate five or more cars at the same time, as in a fleet operation
  • You must not have claimed depreciation, first-year expensing (section 179 deduction), or first-year bonus depreciation in the year the vehicle was placed in service.

If you start out using the business mileage rate for a leased vehicle, you must continue using it for the entire lease period, including renewals.

Advantage of Using the Standard Mileage Rate

Unlike the actual expenses method, if you use the business mileage rate you don't have to save receipts or compute depreciation. However, you need to keep a mileage log regardless of the method you use to claim your vehicle deduction.

Items Included in the Mileage Rate:

The mileage rate takes into account your vehicle's operating expenses (e,g. gas, oil, tires, repairs, maintenance and insurance). However, the following items may also be deducted in addition to your mileage deduction:

  • Tolls
  • Parking fees
  • Interest on a vehicle loan.
    • If you're self-employed and have a loan on a vehicle that you use for business, part or all of the interest that loan may be deducted on Schedule C. The amount of deductible interest depends on the business-use percentage of that vehicle. For example, if you traveled 40,000 miles during the year and 24,000 miles were business-related, your business-use percentage would be 60% (24,000 / 40,000). If your annual car loan interest was $2,000, the deductible portion would be $1,200 (60% x $2,000).
      • Qualified Passenger Vehicle Interest: This is one of the new deductions for 2025 that is part of the One Big Beautiul Bill. If you do not have self-employment income, you may qualify for the Qualified Passenger Vehicle Interest deduction. This deduction applies to any new passenger vehicle purchased for personal use only and the purchaser is the first owner. Applicable vehicless include:
        • Any new vehicle whwich has at least two wheels, and which is a car, mini van, van, sport utility vehicle, pickup truck, or motorcycle whose primary use is on the public streets, roads, and highways.
        • Final assembly must have occurred in the United States to qualify.
        • Qualified loan interest may include refinancing of existing debt, but the indebtedness must be incurred after December 31, 2024.
        • Qualified loan interest does not include: fleet sales, cash-out loans on a previously purchased vehicle, commercial vehicles not used for personal purposes, lease financing, salvage titles vehicles to be used for scrapt, or interest on loans owed to a related party.
        • To determine the amount of your No Tax on Car Loan Interest deductionn, use Part IV of Schedule 1-A.
  • Taxes paid on your vehicle:
    • The personal property tax portion of the vehicle's registration fee is deductible. Some states, such as Arizona, base the registration fee on the value of the vehicle, which is why it's considered a personal property tax. Other states base the registration fee on the vehicle's weight, model, year, or horsepower. Check with your DMV. The non-business portion of the personal property tax may be claimed as an itemized deduction.
    • The business portion of sales tax paid on your vehicle is not deductible whether you are an employee or self-employed; sales tax is added to the cost basis of the vehicle for depreciation purposes.

You add these additional items to your mileage deduction (e.g. mileage deduction + additional deductions = Total vehicle deduction).

Keep in mind, regarding annual car loan interest and the personal property tax on your registration (if applicable), you only deduct the business-related portion.

Mileage Log

It's important to keep a mileage log. If audited you'll need it. Without written evidence of your business miles, the IRS may disallow your deduction.

Your mileage log should include:
  • Dates traveled
  • Names of clients/customers visited
  • Business purpose of trips
  • Beginning and ending odometer reading for each trip
  • Total miles traveled on each trip
  • Weekly and monthly summary of miles traveled
  • Total annual miles traveled

Mileage Sampling

If you have a pattern of business use the IRS may allow you to record your mileage for a representative part of the year instead of the whole year, for example, four months. This may be possible if you visit the same clients and do little driving soliciting new clients.

Schedule C

Schedule C provides a place to enter specific information about your vehicle. For example, the date you placed it in service for business purposes and whether you have evidence to support your deduction. You also enter your total annual mileage, business mileage and commuting mileage (if any).

When You May Not Use the Standard Mileage Rate

You may NOT claim the IRS standard mileage Rate if you:

  • Used five or more cars at the same time (such as in fleet operations).
  • Claimed a depreciation deduction for the car using any method other than straight line, for example, MACRS).
  • Claimed first-year expensing (the section 179 deduction) on the car.
  • Claimed the special depreciation allowance (bonus depreciation) on the car
  • Claimed actual car expenses.

Switching to the Actual Expense Method

While you're allowed to switch from the standard mileage rate to the actual expense method for a vehicle you use for business purposes, you may not switch from the actual expense method to the standard mileage rate for that same vehicle.

If you switch from the standard mileage rate to the actual expense method, you must use straight-line depreciation for that vehicle for its remaining recovery period, provided there is still sufficient basis remaining.

Bear in mind, the mileage allowance has built into it an allowance for depreciation. Consequently, if the depreciation portion of the mileage allowance that you've been deducting over the years would reduce the vehicle's basis to zero, no additional depreciation may be deducted for that vehicle at the time you switch to the actual expense method.

The depreciation component included in the standard mileage rate is as follows:
  • 35 cents per mile: 2026
  • 33 cents per mile: 2025
  • 30 cents per mile: 2024
  • 28 cents per mile: 2023
  • 26 cents per mile: 2022

Keep in mind, if you dispose of your vehicle, you must reduce its basis by the above rates for purposes of determining gain or loss.

Leased Vehicles

If you start using the IRS mileage allowance method for a leased vehicle, you must use it for the entire lease period, including renewals. If you use your vehicle for both business and personal use, multiply the total lease charges by your business-use percentage to find the deductible amount.