What is the IRS mileage tax deduction?
The standard mileage tax deduction lets business owners and self-employed folks write off vehicle expenses when using a personal car for business. If you’re putting miles on your vehicle for work, you can deduct them if they’re the right kind of miles.
How do you know if they’re the right kind of miles? Here’s what the Internal Revenue Service (IRS) considers business driving:
- Client meetings and site visits
- Travel between different work locations
- Driving from your office to job sites
- Business errands (like bank runs or supply pickups)
- Trade shows, conferences, and business events
Note that commuting from home to your workplace doesn’t qualify as a business mileage tax deduction.
Pro tip: If you use your vehicle for business, whether doing deliveries, client visits or visiting job sites, commercial auto insurance is worth considering. It provides better protection than personal coverage, and it’s tax-deductible.
How to claim mileage on taxes
The IRS rules around the business use of a car, vehicle depreciation, and mileage tax deduction are pretty straightforward for taxpayers. You’ve got two ways to do it — let’s explore each to find out how mileage deduction works.
Option 1: The standard mileage deduction
Most business owners choose this method because it’s the easiest option. To start, you don’t need to track all vehicle-related costs. But you must own or lease the car and record your business miles throughout the year.
For each business trip, jot down:
- The date
- Starting and ending odometer readings
- Where you went
- Purpose of the trip
How to calculate standard mileage deduction
Once you have your total annual miles of business driving, multiply that number by the annual IRS mileage rate — that’s what the standard mileage deduction is, and it comes in at 67 cents per mile for 2024. (The IRS typically announces each new year’s rate in December, so keep an eye out for the standard mileage deduction for 2025.)
Option 2: Claim actual expenses
Calculations using the actual expense method require tallying the actual cost of operating the car. You’ll need to keep every receipt all year for things like:
- Gas and oil
- Repairs and maintenance
- New tires
- Registration fees
- Loan interest or lease payments
- Vehicle insurance
Which method should you choose?
If your business driving qualifies for both, the IRS suggests that you calculate both the standard mileage deduction and actual expenses to see which one gives you the best deduction. But first, here are some IRS rules you should know about owning vs. leasing your car:
- If you own your car, you’ll use the standard mileage rate for the first year. After that, you can switch between methods to maximize your deduction.
- If you lease, it’s a bigger decision. Once you pick the standard mileage rate, you’re locked in for the entire lease period — including any renewals. So run the numbers carefully before you choose.
The self-employed mileage tax deduction
If you’re self-employed, a freelancer, or a sole proprietor, the itemized deduction is one of several independent contractor tax deductions that can help lower your tax rate.
How does the mileage deduction work? You track business miles using your personal vehicle for work throughout the year and apply the standard IRS mileage rate when you file your tax return.
But here’s something many home-based business owners miss: While regular commuting miles don’t qualify for a deduction, the rules are different when you work from home. You can deduct trips from your home to client meetings and other work locations if you have a legitimate home office.
Pro tip: You can deduct more than mileage when you’re self-employed. Most business insurance premiums are tax deductible, too — you’ll pay less in taxes because the premiums help to lower your taxable income. Here are a few common coverages you’ll want to consider:
6 tips to deduct mileage for business
Whether you’re tackling small business taxes as a beginner or you’ve been at it for years, these six tips can help guide you through the vehicle mileage deductions for this tax year.
- Get the right auto insurance. If you use your vehicle for business, you may need more than a personal car insurance policy. Commercial auto insurance protects your small business if you deliver goods like pizza or flowers, carry equipment you use for work, or drive to job sites.
- Use a mileage-tracking app. Apps can use GPS to record trips and mileage and categorize them as business or personal.
- Keep a backup log. The IRS requires detailed documentation of business mileage. A physical log as a backup can be helpful if digital records are lost.
- Know what qualifies as business mileage. Not all business-related driving is deductible. Get familiar with the IRS rules to clarify what qualifies as business mileage.
- Periodically review your mileage log. Check your log regularly to help avoid discrepancies and ensure that you record all business driving.
- Consider your actual business expenses. While the standard mileage rate method is more straightforward, sometimes the actual expense calculation (where you track all vehicle-related expenses) can give you a higher deduction. Track both calculations and categorize your expenses to determine the best for your small business.
Lastly, to learn more about what is the tax deduction for mileage, consult a tax professional. Tax laws and mileage reimbursement can be complex. Consulting a tax professional can ensure you maximize your deductions, especially if you’re filing small business returns for the first time.
