How to Claim the Standard Mileage Deduction for Business Use of a Car

If a business owner uses their personal car for business, they’re allowed to take what’s known as the standard mileage deduction. Over the course of the year, these business miles can add up to substantial tax deductions. But how much a business owner can deduct for mileage depends on a number of factors.

The Internal Revenue Service (the IRS for short) offers two options for a business owner to claim tax deductions for business use of their vehicle. It is possible for a business owner to deduct the actual expenses they incur using the vehicle for work, or, provided certain criteria are met, they can deduct the standard mileage rate for each mile they drive while working.

What is the standard mileage deduction?

The standard mileage deduction allows a business owner to reduce their taxable income by subtracting a certain monetary amount for each mile they drive in their personal vehicle for business purposes. To take advantage of it, a business owner needs to keep a log of the business miles they’ve driven (ideally with notes to show the business purpose of those miles). Then, they can multiply the total miles driven by the IRS standard mileage rate for the year.

If a business owner uses this mileage deduction, they can also deduct the cost of tolls and parking fees.

Need help? ZenBusiness Money Pro makes it simpler for a small business owner to track all business expenses, including business mileage.

What is the federal mileage rate for 2026?

Every year, the IRS adjusts the standard mileage rate based on the fluctuating costs of operating a vehicle, including the cost of fuel. Usually, this mileage rate is only updated once a year, but back in 2022, the IRS did make a mid-year adjustment to reflect the increase in gas prices that year. A business owner should always check the rate for business miles driven in a given year.

For 2026, the standard deduction rate is 72.5 cents per mile for business miles. If a person is deducting miles for medical and moving purposes, the rate is just 20.5 cents per mile. It’s important for a business owner to verify that they’re using the correct amount when they calculate deductions.

Remember, the IRS mileage rate is subject to change, so it’s prudent to double-check with the IRS’s website for the most up-to-date information.

For example, suppose a self-employed individual checks their mileage log and sees that they drove 1,500 business miles during 2026. At tax time in 2027, they would calculate their mileage deduction by multiplying 1,500 by $0.725. That would give them a deduction of $1,087.50 for their driving expenses. That’s a simplified example, but that’s the basics of how the business mileage deduction works.

How does a business owner qualify to take the standard deduction for business mileage?

A business owner needs to qualify to use this deduction. The most important criterion is that the business owner either owns the vehicle outright or leases the vehicle for which they’re making the deduction. A business owner cannot use the standard rate if they:

• Use five or more cars at the same time (i.e., a fleet operation)
• Claim vehicle depreciation with any method other than straight-line or a section 179 deduction (Publication 463, Chapter 4)
• Are a rural mail carrier who receives a qualified reimbursement (Publication 463, Chapter 4).

What are other deductible vehicle expenses?

If a business owner uses the standard mileage deduction, they can still deduct a couple of expenses like parking fees and tolls incurred while using the car or truck for business. The business percentage of any auto loan interest or personal property taxes can also qualify as a deductible cost. However, a business owner can’t deduct actual expenses like gas, oil, insurance, taxes, vehicle maintenance, and other expenses while claiming the standard mileage rate. The IRS considers those expenses to be covered in the mileage allowance. 

How does a business owner maintain records for the standard mileage method?

A business owner doesn’t have to log their odometer reading for every single trip. Instead, they can record their vehicle odometer reading at the beginning of the year and the end of the year. Then, each time they use their car for business, they can record how many miles they traveled, where they went, and the purpose of the trip.

The IRS expects business owners and self-employed workers to keep good records of their business miles. ZenBusiness Money Pro is a great tool for this, but it’s possible to use standalone smartphone apps or even a simple spreadsheet for recording mileage. The important thing is that a business owner has documented records for each time they use the vehicle for business.

What is the actual expenses method?

Businesses that use the actual expense method of operating their vehicles can deduct depreciation on the vehicle and costs, including lease payments, registration fees, insurance, garage rental, gas, repairs, tune-ups, and tires. Deductions are prorated to the business use of the car, and there are limitations on depreciation and the deductibility of lease payments on vehicles above certain fair market values.

Recordkeeping and figuring out depreciation allowances can be fairly complex using the actual expense method. In some cases, using the actual expense method can give a small business a bigger deduction than the standard mileage rate, but if in doubt, it’s prudent to check with a tax lawyer or licensed accountant. The IRS also offers a variety of resources explaining this expense method.

Conclusion

Before a business owner commits to using the standard mileage rate, they might want to spend some time calculating which method is most beneficial. For some people, using the actual expense method yields bigger savings. But it’s important to note that once a person uses the actual expense method for a particular vehicle, they’ll be required to continue using that method in future tax years.