Standard mileage vs actual expenses is the choice of how you deduct a car you use for work. In fact, it’s one of the biggest freelancer tax deductions for anyone who drives for business. So the right pick can be worth thousands of dollars a year.
Quick answer:
- Standard mileage: multiply your business miles by the IRS rate. For 2026, that’s 72.5¢ per mile from January to June and 76¢ from July to December.
- Actual expenses: add up gas, insurance, repairs, registration and depreciation. Then deduct your business share.
- Who usually wins: high-mileage drivers in cheap cars do better with standard mileage. On the other hand, people with an expensive car and fewer miles often do better with actual expenses.
Also, parking and tolls for business trips are deductible with both methods. Below, you’ll find how each method works, two real examples and the rules for switching.
What counts as business driving
First, both methods only cover business miles. For that reason, this step matters more than the method you pick.
Business miles (deductible):
- Trips to meet a client
- Runs to buy supplies or ship orders
- Travel between two work locations
- Rideshare and delivery miles while the app is on
- A drive to a business conference
Personal miles (not deductible):
- Your commute to a regular office or coworking space
- Errands, school runs and weekend trips
- Personal detours during a work trip
- Visits to the gym or the doctor
- Vacation driving
Your home office changes the math. If your home is your main place of business, trips from home to clients count as business miles. Otherwise, the first trip of the day may count as commuting. That’s one more reason to look into the home office deduction.
Gig drivers: miles driven with the app on are business miles. However, the drive home after your shift is harder to justify, so track it separately.
How the standard mileage method works
The standard mileage rate is a flat amount per business mile. It already covers gas, maintenance, insurance and depreciation. As a result, you don’t need to track those costs.
| Period | IRS rate per business mile |
|---|---|
| January 1 – June 30, 2026 | 72.5¢ |
| July 1 – December 31, 2026 | 76¢ |
| 2025 (full year) | 70¢ |
In 2026, the IRS raised the rate in the middle of the year, which is unusual. Therefore, note the date of every trip. For example, 1,000 miles in March are worth $725, while the same miles in September are worth $760. You can always check the latest figures on the IRS standard mileage rates page.
What you can add on top:
- Parking fees and tolls for business trips
- The business share of interest on a car loan
What you can’t add: gas, oil changes, insurance, repairs or depreciation. After all, the rate already covers them.
Best for: high-mileage drivers, cheap or older cars, and anyone who hates keeping receipts.
How the actual expense method works
With this method, you add up what your car really cost during the year. Then you deduct the business share.
Step 1: find your business-use percentage
First, divide your business miles by your total miles. For instance, 5,000 business miles out of 12,500 total gives you 40%.
Step 2: add up your car costs
These costs count:
- Gas and oil
- Repairs, tires and maintenance
- Insurance
- Registration and license fees
- Lease payments, if you lease
- Depreciation, if you own (within IRS limits)
- Car washes
Besides, parking and tolls for business trips are deductible in full, separately. Traffic tickets, however, never are.
Step 3: multiply
Finally, multiply your total car costs by your business percentage. The result is your deduction.
Depreciation is the big variable. On a newer or pricier car, it can be large. That’s why actual expenses often win for expensive vehicles. However, the IRS caps yearly depreciation on passenger cars, and heavy SUVs follow different rules. So this is where tax software or a professional earns its keep.
Best for: expensive or new cars, high running costs, or fewer business miles.
Standard mileage vs actual expenses: two examples
Both examples use the 2026 rates. In each case, half the business miles fall in each half of the year.
Example 1: a delivery driver
Carlos delivers for DoorDash and Uber Eats in a paid-off compact car. This year he drove 23,500 miles, and 20,000 of them were for work (85%).
- Standard mileage: 10,000 × 72.5¢ + 10,000 × 76¢ = $14,850
- Actual expenses: $9,300 of costs × 85% = $7,915
His costs were gas ($3,200), insurance ($1,800), repairs ($1,000), registration ($300) and depreciation ($3,000).
Winner: standard mileage, by $6,935. In short, cheap cars that drive a lot almost always win with the standard rate.
Example 2: a consultant with an SUV
Rachel is a consultant with a newer SUV. She drove 12,500 miles, and 5,000 of them were client visits (40%).
- Standard mileage: 2,500 × 72.5¢ + 2,500 × 76¢ = $3,713
- Actual expenses: $13,800 of costs × 40% = $5,520
Her costs were gas ($2,000), insurance ($2,400), repairs ($800), registration ($600) and depreciation ($8,000).
Winner: actual expenses, by $1,807. This time, depreciation on a pricier car makes the difference.
In both cases, the deduction lowers your income tax and your self-employment tax. To see what that means for you, try both figures in our self-employment tax calculator.
Can you switch between standard mileage and actual expenses?
Sometimes. However, your first year with a car decides your options. These are the main rules from IRS Topic 510:
- Owned car, standard mileage in year one: later on, you can use either method. If you switch to actual expenses, depreciation must follow the straight-line method.
- Owned car, actual expenses in year one: in general, that car can’t move to standard mileage later.
- Leased car on standard mileage: the method stays for the whole lease, including renewals.
- Five or more cars at once: standard mileage isn’t allowed.
The practical takeaway: if you’re unsure, choose standard mileage in the first year. That way, both doors stay open, and you can compare the methods every year after that.
Above all, run the numbers before you file a new car’s first return, because that choice sticks.
Records you need for standard mileage vs actual expenses
Keep a mileage log
Both methods need proof of your business miles. In other words, a mileage log is your most important record. For every work trip, write down:
- the date
- where you went
- why you went
- how many miles you drove
Also note your odometer reading on January 1 and December 31. A notebook works fine. Even so, a mileage app that runs in the background is much easier. For actual expenses, keep every receipt for gas, repairs, insurance and registration too.
Where it goes on Schedule C
Your car deduction goes on line 9 (Car and truck expenses) of Schedule C. Then, in Part IV, you answer a few questions about the vehicle. For example, you’ll give your business, commuting and other miles. Parking and tolls also go on line 9.
Frequently asked questions
Is standard mileage vs actual expenses a choice I make every year?
Usually, yes. If you used standard mileage in the car’s first business year, you can compare both methods each year. The exception is a leased car on standard mileage.
Can I use standard mileage vs actual expenses for a car I share with my family?
Of course. Either method only covers your business miles, so family driving doesn’t count. That’s why your mileage log matters so much.
Which is better for Uber and DoorDash drivers: standard mileage vs actual expenses?
In most cases, standard mileage. Gig drivers put lots of miles on fuel-efficient cars, and that’s exactly where the standard rate wins.
Can I deduct my car payment?
Not directly. Instead, with actual expenses you deduct depreciation if you own, or lease payments if you lease. You can also deduct the business share of loan interest. However, the principal part of a loan payment isn’t deductible.
This article is for general information only and isn’t tax advice. Talk to a CPA or Enrolled Agent about your situation.