Standard rate or actual expenses — the answer depends on your car

The IRS gives self-employed workers two methods to deduct business vehicle use. The standard mileage rate is $0.70 per mile in 2026. The actual expense method lets you deduct the business-use percentage of everything you spend on the vehicle: gas, insurance, repairs, registration, and depreciation. Most people default to the standard rate because the math is simple. That's not always the right call.

When standard rate wins

The standard rate wins most often for high-mileage drivers with fuel-efficient, low-cost vehicles. If you drive 20,000 business miles in a paid-off Honda Civic with minimal maintenance costs, the $14,000 standard deduction likely beats anything you'd calculate from actual expenses.

When actual expense wins

Actual expense wins when you have an expensive vehicle with high operating costs and a high business-use percentage. A luxury SUV with $18,000 in annual costs used 80% for business yields a $14,400 deduction — and that's before Section 179 or bonus depreciation, which can accelerate the vehicle's cost recovery in year one. Actual expense also wins for low-mileage drivers with high per-mile costs.

The once-you-choose rule

Once you use the actual expense method for a vehicle, you can't switch to standard rate for that vehicle in a later year. You can switch from standard to actual, but not the other direction. This matters if you're buying a new vehicle — locking in standard rate early keeps your options open.

What the standard rate covers

The IRS standard rate is designed to cover gas, oil, tires, repairs, insurance, registration, and depreciation. If you use the standard rate, you can't also deduct those items separately. You can still deduct parking and tolls as separate business expenses under either method.

Mileage log requirements

Both methods require a contemporaneous mileage log. The IRS wants: date, destination, business purpose, and miles driven for each business trip. Apps like MileIQ or Everlance automate this. A spreadsheet works. Reconstructed logs from memory don't hold up well in audits. Start tracking at the beginning of the tax year, not retroactively.

Standard mileage rate of $0.70/mile applies for 2026. Actual expense method requires Form 4562 for depreciation. Consult a tax professional for vehicles with luxury auto limits or first-year bonus depreciation elections.