IRS Mileage Rate 2024-2025: Using the Actual Expense Method vs. the Standard Mileage Rate

In the past, individual taxpayers were often able to deduct mileage when driving a personal vehicle for business purposes. However, the Tax Cuts and Jobs Act of 2017 eliminated this deduction for individuals. But the self-employed can still claim a mileage deduction.

So, if you use a personal car or another vehicle for business purposes other than just commuting to and from work, you're entitled to take a deduction for driving expenses. The two ways to calculate your deduction are:

• using the standard mileage rate, or
• deducting your actual expenses.

Most people use the standard rate because it's simpler and requires less recordkeeping—you only need to keep track of how many business miles you drive, not the actual expenses for your car. But you might be able to deduct more if you use the actual expense method.

Using the Standard Mileage Rate

With the standard mileage rate, you deduct a set amount for each business mile you drive. The IRS sets the amount each year. For tax year 2024 (the taxes you file in 2025), the standard mileage rate is 67 cents per business mile. For the 2025 tax year, the standard mileage rate is 70 cents per mile.

How to Calculate Your Tax Deduction Using the Standard Mileage Rate

To figure out your deduction, simply multiply your business miles by the applicable standard mileage rate. So, when you use the standard rate, you don't need to keep track of how much you actually spend on gas, repairs, and other car expenses during the year. All you have to do is track your business mileage and total annual mileage.

Most people use the standard mileage rate because it's the simplest and easiest method.

Example. Ethan drove his car 10,000 miles for his real estate business in 2024. To determine his car expense deduction, he simply multiplies his business mileage (10,000) by the applicable standard mileage rate (67 cents). He gets a $6,700 deduction (10,000 x .67 = $6,700).

What Can't You Deduct?

If you choose the standard mileage rate, you can't deduct actual car operating expenses—for example, maintenance and repairs, gasoline and its taxes, oil, insurance, and vehicle registration fees. All of these items are factored into the rate the IRS sets.

And you can't deduct the cost of the car through depreciation or Section 179 expensing because the car's depreciation is also factored into the standard mileage rate (as are lease payments for a leased car).

So, What Expenses Can I Deduct?

The only expenses you can deduct (because these costs aren't included in the standard mileage rate) are:

• interest on a car loan
• parking fees and tolls for business trips (but you can't deduct parking ticket fines or the cost of parking your car at your place of work), and
• personal property tax that you paid when you bought the vehicle, based on its value—this is often included as part of your auto registration fee.

Using the Standard Mileage Rate In the First Year You Use a Car for Business

You must use the standard mileage rate in the first year you use a car for business, or you're forever prohibited from using that method for that car. If you use the standard mileage rate the first year, you can switch to the actual expense method in a later year, and then switch back and forth between the two methods after that.

For this reason, if you're not sure which method you want to use, it's a good idea to use the standard mileage rate the first year you use the car for business. This leaves all your options open for later years.

But this rule doesn't apply to leased cars. If you lease your car, you must use the standard mileage rate for the entire lease period if you use it in the first year.

Using the Actual Expense Method

As the name implies, under the actual expense method, you deduct the actual costs you incur each year to operate your car, plus depreciation. If you use this method, you must keep careful track of all the costs you incur for your car during the year, including:

• gas and oil
• repairs and maintenance
• depreciation of your original vehicle and improvements
• car repair tools
• license fees
• parking fees for business trips
• registration fees
• tires
• insurance
• garage rent
• tolls for business trips
• car washing
• lease payments
• interest on car loans
• towing charges, and
• auto club dues.

When you do your taxes, add up the cost of all these items. For everything but parking fees and tolls, multiply the total cost of all items by your car's business use percentage. You determine your business use percentage by keeping track of all the miles you drive for business during the year and the total mileage driven. You divide the business mileage by your total mileage to figure your business use percentage. For parking fees and tolls that are business related, include (and deduct) the full cost. The total is your deductible transportation expense for the year.

If you have a car that you use only for business, you can deduct 100% of your actual car costs. Be careful, though. If you own just one car, it's usually hard to claim that you use it only for business. The IRS isn't likely to believe that you walk or take public transportation everywhere except when you're on business. If you're a sole proprietor or the owner of a one-person LLC, the IRS will know how many cars you own, because sole proprietors who claim transportation expenses must provide this information on their Schedule C.

Using the actual expense method, you can deduct the cost of your vehicle. However, you can't deduct the entire cost in the year when you purchase your car. Instead, you must deduct the cost a portion at a time over several years, using a process called "depreciation."

For more information on using the actual expense method and vehicle depreciation, refer to Deduct It!, by Stephen Fishman (Nolo).

Tracking Business Mileage

Again, if you use a vehicle for business, you can either deduct the actual cost of your gas and other expenses or take the standard rate deduction based on the number of business miles you drive. Either way, you must keep a record of your mileage.

52-Week Mileage Log

The hardest way to track your mileage—and the way the IRS would like you to do it—is to keep track of every mile you drive every day, 52 weeks a year, using a mileage logbook or business diary. This means you'll list every trip you take, whether for business, commuting, or personal reasons. If you enjoy record keeping, go ahead and use this method.

However, there is a much easier way: use a sampling method.

Sampling Method

Under the sampling method, you keep track of your business mileage for a sample portion of the year and use your figures for that period to extrapolate your business mileage for the whole year. This method assumes that you drive about the same amount for business throughout the year. To back up this assumption, you must scrupulously keep an appointment book showing your business appointments all year long. If you don't want to keep an appointment book, don't use the sampling method.

Your sample period must be at least 90 days—for example, the first three months of the year. Alternatively, you may sample one week each month—for example, the first week of every month. You don't have to use the first three months of the year or the first week of every month; you could use any other three-month period or the second, third, or fourth week of every month. Use whatever works best. You want your sample period to be as representative as possible of the business travel you do throughout the year.

You must keep track of the total miles you drove during the year by taking odometer readings on January 1 and December 31 and deducting any atypical mileage before applying your sample results.

Example. Tom, a traveling salesman, uses the sample method to compute his mileage, keeping track of his business miles for the first three months of the year. He drove 6,000 miles during that time and had 4,000 business miles. His business use percentage of his car was 67%. From his January 1 and December 31 odometer readings, Tom knows he drove a total of 27,000 miles during the year. However, Tom drove to the Grand Canyon for vacation, so he deducts this 1,000-mile trip from his total. This leaves him with 26,000 total miles for the year. To calculate his total business miles, he multiplies the yearlong total by the business use percentage of his car: 67% × 26,000 = 17,420. Tom claims 17,420 business miles on his tax return.

Choosing Whether to Use the Standard Mileage Rate or the Actual Expense Method

If you take the standard deduction, you have a much easier task. But your deduction might be smaller. If you go with the standard mileage deduction, you'll have to keep a mileage log. For the actual expense method, you'll need the mileage log plus receipts for all the expenses you plan to deduct. Ultimately, you need to decide how much effort you want to put into claiming the deduction.

To be safe, you might want to keep track of all your expenses and mileage the first year you purchase a car for business. Then, when you do your taxes for the year, you can calculate what your deduction would be using both methods.

You can then choose whether to use the actual expense method. Keep in mind that if you do so, you'll have to continue to use this method for as long as you own your car. Also, remember that you're allowed to use the standard mileage rate only if you use it the first year you use your car for business.

Get More Information

For more information about tax deductions, talk to a tax pro, such as a tax lawyer or a certified public accountant.