Tax Talk & Business Tips

If you use a vehicle for business, the IRS gives you two ways to deduct those costs: the standard mileage rate or the actual expenses method. Knowing which to use—and when—can make a real difference in your tax savings. This guide breaks down the rules, benefits, drawbacks, and IRS requirements with accuracy.

Two Methods: What Are Your Options?

Standard Mileage Rate

• • • • Use a fixed per-mile rate set by the IRS (70¢ per business mile in 2025)

      • Covers operating costs like fuel, insurance, repairs, and depreciation in one simple calculation.

      • Ideal for high-mileage users with low costs or those who prefer simplicity and minimal recordkeeping.

Actual Expense Method

• • • • Involves recording all actual vehicle expenses—fuel, maintenance, insurance, depreciation or lease, registration fees, and more—and applying your percentage of business use.

      • Best for those with high vehicle-related costs or lower business mileage, when real costs exceed the standard rate.

Eligibility & Switching Rules

• • • • To use the standard mileage rate, you must use it the first year the vehicle is placed in business use—or if leasing, for the entire lease term.

      • Once you choose actual expenses in that initial year, you generally can't revert to the standard rate later.

      • Note some restrictions: can't use the standard rate if you've claimed Section 179, bonus depreciation, or deducted actual expenses on that vehicle before—but either method allows separate deductions for parking and tolls.

Year-to-Year Strategy: Calculate Both

Each year, run the numbers both ways:

Standard Mileage Example (2024 rate: 67¢): 30,000 business miles = $20,100 deduction.

Actual Expenses Example: Total vehicle costs of $11,300 * 75% business use = $8,475 deduction.

In that case, the standard mileage method delivers a much higher benefit—but the outcome varies depending on mileage and costs

Recordkeeping & IRS Requirements

For Standard Mileage:

Keep a detailed mileage log: date, purpose, destination, and miles driven.

IRS allows separate deductions for parking and tolls.

For Actual Expenses:

Save receipts and records for all vehicle-related expenses, plus log business-use percentage.

Report vehicle deduction, whether via standard mileage or actual costs, on Schedule C (Form 1040)

Quick Comparison Table

Final THoughts

Your best method depends on your driving habits and vehicle costs. Always run both methods annually to make sure you're maximizing your deduction. And if you need help tracking, documenting, or picking the method that fits your business, we’re here to help.

Want help choosing the best vehicle deduction method for your business?

Our team at Certus can guide you through the IRS rules, help you set up compliant recordkeeping, and ensure you're optimizing your auto deductions.

Click here to contact us today!