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Key takeaways
- Business driving is deductible; commuting from home to a regular workplace is not.
- The standard mileage rate for 2026 is 72.5 cents per business mile.
- To keep the option of using standard mileage, you generally must use it in the first year the car is used for business.
- Either way, you need a contemporaneous log of business miles.
For contractors and owners who drive to clients, job sites or suppliers, vehicle costs add up quickly. The tax code gives you two ways to deduct them. Picking the right one — and keeping the records that support it — can be worth thousands of dollars a year.
What counts as business driving
- Driving between your office (including a qualifying home office) and a client, job site or temporary work location
- Trips to the bank, post office or supplier for the business
- Travel between two business locations during the day
What doesn't count: commuting from home to your regular place of business, and personal errands tacked onto a business trip. If your home office is your principal place of business, trips from home to clients are generally business travel rather than commuting — one more reason a qualifying home office matters.
The standard mileage method
Multiply your business miles by the IRS standard rate — 72.5 cents per mile for 2026. The rate is meant to cover gas, maintenance, insurance, registration and depreciation. You can still separately deduct business parking, tolls and the business share of interest on a car loan (for self-employed taxpayers).
Example: 12,000 business miles × $0.725 = $8,700 deduction.
The first-year rule: if you want to use the standard rate for a car you own, you generally must choose it in the first year the car is used in your business. After that, you can switch to actual expenses in later years. If you start with actual expenses and accelerated depreciation, you generally can't switch to standard mileage later for that vehicle. For leased cars, if you choose standard mileage you must use it for the entire lease.
The actual expense method
Add up the real costs of operating the vehicle — fuel, repairs, tires, insurance, registration, lease payments or depreciation, interest — and multiply by your business-use percentage (business miles divided by total miles).
Depreciation is where this method can get large. A vehicle used more than 50% for business may qualify for bonus depreciation or Section 179 expensing, subject to annual caps for passenger vehicles. Heavier SUVs, pickups and vans rated above 6,000 pounds gross vehicle weight aren't subject to the passenger-car caps, though SUVs have their own lower Section 179 limit. See Section 179 and bonus depreciation in 2026.
Two cautions. If business use later drops to 50% or less, some of the depreciation you took can be "recaptured" as income. And when you sell the vehicle, depreciation you claimed generally increases your taxable gain.
How to choose
| Standard mileage usually wins when… | Actual expenses usually win when… |
|---|---|
| You drive a lot of miles in an efficient, inexpensive car | The vehicle is expensive, heavy or costly to run |
| You want minimal record-keeping beyond the log | You drive fewer miles but use the vehicle mostly for business |
| You want flexibility to switch later | You want a large first-year write-off on a new purchase |
The best approach is to calculate both in the first year before committing — including what happens when you eventually sell the car.
The mileage log that holds up
Vehicle expenses fall under stricter substantiation rules than most deductions. Estimates after the fact are routinely disallowed. For each business trip, record:
- The date
- The destination
- The business purpose (the client or task)
- The miles driven
Also record the odometer reading at the start and end of each year, so total and business miles can be compared. The easiest way to do all of this is an automatic mileage-tracking app that records every drive and lets you classify it with a swipe. It's the same data, captured when it happens — which is exactly what "contemporaneous" means.
ExcelTax reviews your mileage log each quarter and calculates both methods before you file, so you're never locked into the wrong one by accident.
This article is general information, current as of September 2026, and isn't tax advice for your situation. Figures are federal unless noted, and indexed amounts change each year — confirm current numbers with your tax pro before acting.