The two methods
Standard mileage: Multiply business miles × $0.70 (2025 rate). Also deduct parking, tolls, and business-related interest/property taxes on the vehicle. Done.
Actual cost: Track every vehicle expense (gas, insurance, maintenance, depreciation, lease payments). Multiply by the business-use percentage of total miles. Deduct that.
The switching rule that catches people
If you use actual cost in the first year you place the vehicle in service, you're locked into actual for the life of that vehicle. You can never switch to standard mileage for that car.
If you use standard mileage in year one, you can switch to actual later — but only with straight-line depreciation, not MACRS.
This is why many self-employed people "default" to standard mileage year one. It preserves optionality. But it can cost you.
When standard mileage wins
- You drive a lot (10,000+ business miles/year)
- Your vehicle is cheap to operate (efficient, paid-off)
- You hate receipts
- It's your first year with this vehicle and you want to preserve the option to switch later
When actual cost wins
- You bought a new, expensive vehicle (big depreciation)
- Low annual business miles (under 5,000)
- High operating costs (luxury insurance, frequent maintenance, premium gas)
- You're already tracking expenses for another reason
Side-by-side: new $45,000 vehicle, 6,000 business miles, 60% business use
Standard mileage: 6,000 × $0.70 = $4,200
Actual cost:
Depreciation (luxury auto limit Year 1 with bonus): ~$20,200 × 60% = $12,120
Gas $3,000 × 60% = $1,800
Insurance $1,800 × 60% = $1,080
Maintenance $600 × 60% = $360
Total: $15,360
Actual wins by $11,160. At a 24% federal + 15.3% SE tax, that's about $4,400 in refund impact in Year 1. After Year 1, standard mileage usually catches up as the depreciation lead shrinks.
Mileage logging: the part everyone hates
Whichever method you pick, you need a mileage log for the business portion. Options:
- MileIQ / Everlance / TripLog — auto-tracking apps ($60–$120/year, deductible)
- Google Timeline — free if you keep location history enabled, export monthly
- Paper log — tedious but audit-proof if consistent
Reconstructing a year of miles in April is miserable. Start now.
Common mistakes
- Deducting commute miles — driving from home to your primary office is personal, never business (with narrow home-office exception)
- Claiming 100% business use when you obviously use the car for grocery runs too — flags audit
- Using standard mileage AND deducting gas — standard mileage includes gas; you can't double-dip
- Switching from actual to standard mid-life of vehicle — not allowed
Leased vehicles: one more wrinkle
If you use standard mileage on a leased vehicle, you must use it for the entire lease period. No mid-lease switching. Most leased vehicles actually do better on actual-cost because the monthly lease payment times business-use percentage is usually larger than mileage × $0.70 (unless you drive a lot).
We flag suboptimal vehicle method choices.
If you'd get more deduction with the other method (and you're not locked in), we'll tell you.