Vehicle deduction: standard mileage rate vs actual costs

Most self-employed people who drive for work can choose between two ways of deducting vehicle costs, and the choice has consequences for later years. This guide compares the standard mileage rate with actual expenses, using the 2026 rates, and covers the rules that decide what you can switch between.

By Mirza Fahad Baig, Chartered Accountant. Reviewed by Muhammad Bilal, Chartered Accountant. Checked against official sources on . 3 minute read.

Short answer

Mileage deduction vs actual expenses: the standard mileage rate lets you deduct a set amount per business mile: 72.5 cents from January 1 to June 30, 2026 and 76 cents from July 1, 2026, plus parking and tolls. The actual expense method deducts the business share of fuel, repairs, insurance, registration and depreciation. To keep the choice open for an owned car, use the standard rate in its first business year.

At a glance

2026 standard rate
72.5 cents to June 30, 76 cents from July 1
Added to both methods
Business parking and tolls
Actual expenses
Business share of fuel, repairs, insurance, registration, depreciation or lease
First-year rule
Use the standard rate in the car's first business year to keep flexibility
Leased cars
If you use the standard rate, keep it for the whole lease
Never deductible
Commuting between home and a regular workplace
Vehicle deduction: standard mileage rate vs actual costs2026 standard rate: 72.5 cents to June 30, 76 cents from July 1; Added to both methods: Business parking and tolls; Actual expenses: Business share of fuel, repairs, insurance, registration, depreciation or lease; First-year rule: Use the standard rate in the car's first business year to keep flexibility; Leased cars: If you use the standard rate, keep it for the whole lease; Never deductible: Commuting between home and a regular workplace.KEY FACTS AT A GLANCEVehicle deduction: standard mileage rate vs actualcosts2026 standard rate72.5 cents to June 30, 76cents from July 1Added to both methodsBusiness parking andtollsActual expensesBusiness share of fuel, repairs,insurance, registration,depreciation or leaseFirst-year ruleUse the standard rate inthe car's first businessyear to keep flexibilityLeased carsIf you use the standardrate, keep it for thewhole leaseNever deductibleCommuting between homeand a regular workplaceChecked against official sourcesTax BakersVehicle deduction: standard mileage rate vs actual costs2026 standard rate: 72.5 cents to June 30, 76 cents from July 1; Added to both methods: Business parking and tolls; Actual expenses: Business share of fuel, repairs, insurance, registration, depreciation or lease; First-year rule: Use the standard rate in the car's first business year to keep flexibility; Leased cars: If you use the standard rate, keep it for the whole lease; Never deductible: Commuting between home and a regular workplace.KEY FACTS AT A GLANCEVehicle deduction: standardmileage rate vs actual costs2026 standard rate72.5 cents to June 30, 76 cents from July 1Added to both methodsBusiness parking and tollsActual expensesBusiness share of fuel, repairs, insurance,registration, depreciation or leaseFirst-year ruleUse the standard rate in the car's firstbusiness year to keep flexibilityLeased carsIf you use the standard rate, keep it forthe whole leaseNever deductibleCommuting between home and a regularworkplaceChecked against official sourcesTax Bakers
Key facts at a glance, as set out in this guide.

What are the 2026 standard mileage rates?

The IRS set the business rate at 72.5 cents a mile from January 1, 2026, and raised it to 76 cents a mile for driving from July 1 to December 31, 2026. Use the rate for the period in which each trip was made. Business parking fees and tolls are deducted in addition.

How do the two methods compare?

Standard mileage rateActual expenses
DeductionBusiness miles x the rateBusiness percentage x total vehicle costs
CoversFuel, maintenance, insurance, depreciation, all in the rateEach cost separately, plus depreciation or lease payments
RecordsMileage logMileage log plus every receipt
Parking and tollsDeducted separatelyDeducted separately
SuitsEconomical cars and high mileageExpensive or costly-to-run vehicles, and high business use

Which gives more?

A consultant drives 10,000 business miles in 2026, half before July and half after. The standard method gives 5,000 x 72.5 cents plus 5,000 x 76 cents, which is $7,425. If the car's total costs for the year were $12,000, including depreciation, and business use was 50%, the actual method gives $6,000. Here the standard rate wins. With a costlier vehicle or higher business use, the answer can reverse.

Can you switch between methods?

  • Owned vehicle: if you use the standard rate in the first year the car is used for business, you can switch to actual expenses in a later year, with depreciation calculated on a straight-line basis. If you start with actual expenses using accelerated depreciation, you generally cannot switch to the standard rate for that car.
  • Leased vehicle: if you choose the standard rate, you must use it for the entire lease period.
  • Five or more vehicles at once: the standard rate is not available for a fleet used at the same time.

What counts as business driving?

Trips to clients, suppliers, temporary work sites, the bank for the business, and between business locations. Driving from home to a regular place of work is commuting and is never deductible. If your home office is your principal place of business, trips from home to other business locations generally count as business. See the home office deduction.

What records do you need?

A mileage log kept at or near the time of each trip: date, destination, business purpose and miles, plus total miles for the year. For actual expenses, keep receipts for every cost too. Schedule C asks directly whether you have written evidence. See Schedule C.

What about S corps and partnerships?

An S corporation owner-employee is usually reimbursed by the company for business mileage under an accountable plan, at up to the standard rate, and the company deducts it. Partners may be reimbursed by the partnership, or deduct unreimbursed costs where the partnership agreement requires them to bear them. See deductible business expenses.

Want the method that saves you more?

We compare both methods from your mileage and running costs, and keep your vehicle deduction supported by the right records.

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Questions people ask

What is the IRS mileage rate for 2026?

72.5 cents per business mile from January 1 to June 30, 2026, and 76 cents from July 1 to December 31, 2026.

Is standard mileage or actual expenses better?

Standard mileage often suits economical cars and high mileage. Actual expenses can give more for costly vehicles or very high business use. Compare both.

Can I switch from actual expenses to standard mileage?

Generally not for the same car if you started with actual expenses and accelerated depreciation. Starting with the standard rate keeps the option open.

Is driving to my office deductible?

No. Commuting between home and a regular workplace is not deductible.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IRS: 2026 standard mileage rate announcement
  2. IRS Notice 2026-10 and Announcement 2026-11: 2026 standard mileage rates
  3. IRS Publication 463: Travel, Gift, and Car Expenses

Rules and fees change. If you are reading this long after September 30, 2026, confirm the figures with the source before you rely on them.

Business tax by entity typeBusiness expenses you can deduct: a working listBusiness tax by entity typeHome office deduction: who qualifies and how to calculate itFederal tax formsSchedule C (Form 1040): reporting business income

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This guide is general information. It is not tax or legal advice for your situation.