Standard mileage rate

The IRS sets a per-mile business rate annually (e.g., 67¢ for 2024). The rate already includes depreciation, gas, oil, insurance, repairs, and maintenance — you separately deduct only parking, tolls, and auto loan interest (proportional to business use). To use the standard rate, you must elect it in the first year a vehicle is placed in service.

Actual expense method

Add up all actual vehicle expenses for the year — gas, oil, insurance, registration, tires, repairs, depreciation, lease payments — and multiply by business-use percentage (business miles ÷ total miles). The actual method usually wins for high-cost vehicles, vehicles with heavy depreciation, or low-mileage vehicles where fixed costs dominate.

Switching methods

If you start with the standard rate, you may switch to actual in a later year — but you must use straight-line depreciation for the remainder of the vehicle's life. If you start with the actual method (claiming MACRS, Section 179, or bonus depreciation), you cannot later switch to the standard rate for that vehicle.

Recordkeeping

Section 274(d) requires contemporaneous records showing date, miles, destination, and business purpose for each business trip. Smartphone mileage trackers (MileIQ, Stride, QuickBooks) make this nearly automatic. Reconstructed-from-memory logs years later are routinely disallowed in audit.

Commuting is not deductible

Travel between home and a regular place of business is non-deductible commuting. Travel to a temporary work location is deductible. Travel between two business locations is deductible. Travel from a qualifying home office to anywhere business-related is deductible from the first mile.

Worked example with numbers

Consider a sole prop with $100,000 in gross receipts and $30,000 in legitimate Schedule C deductions, including this category. Each additional $1,000 of qualifying expense reduces Schedule C net profit by $1,000, which reduces self-employment tax by approximately $1,000 × 92.35% × 15.3% ≈ $141, and reduces income tax by $1,000 × marginal rate. At a 22% federal marginal rate, the combined federal tax savings on each additional $1,000 of legitimate deduction is roughly $361, and state savings sit on top of that. The math is why disciplined categorization throughout the year pays for itself.