How to Deduct Business Use of Your Car: Mileage vs. Actual Expenses Explained!

Joe Mardesich
Apr 29
2 min read

If you use your car for business, you can claim a valuable tax deduction. There are two main methods to do this Standard Mileage Rate and Actual Expenses. Choosing the right one can help you save more. Here's what you need to know:

1. Choose Between Two Deduction Methods

You have two IRS approved ways to deduct car expenses:

Standard Mileage Rate
Actual Expense Method: You must choose one, and depending on your situation, one may result in a bigger deduction than the other.

2. Standard Mileage Rate (Simple and Quick)

With this method, you multiply your total business miles by the IRS mileage rate (67 cents/mile for 2024). It’s a straightforward option that doesn’t require tracking gas, repairs, or other costs just your mileage.

Example: If you drove 4,000 business miles, your deduction would be: 4,000 × $0.67 = $2,680

This method is best for small business owners who drive a lot but want a hassle free calculation.

3. Actual Expense Method (More Work, Possibly Bigger Deduction)

This method involves adding up all car related costs like gas, insurance, repairs, maintenance, and depreciation. Then, you multiply that total by the percentage of time the vehicle was used for business.

Example: If your total expenses were $8,000 and 70% of the use was for business:$8,000 × 70% = $5,600 deduction

Use this method if your vehicle is expensive to operate or you're willing to track more details for a larger potential deduction.

4. Track Your Business Mileage or Expenses Accurately

No matter which method you choose, the IRS requires good documentation.Use mileage tracking apps like MileIQ, Everlance, or QuickBooks to record trips.If you choose the Actual Expense method, save all receipts and note business use percentage.

5. You Can’t Freely Switch Methods Each Year

Once you choose a method especially with leased or depreciating vehicles you may be locked into it for future years. So in the first year, run the numbers both ways and commit to the most profitable option.

6. Don’t Mix Personal and Business Use

If you use the same vehicle for personal and business, only the business portion is deductible. Keep clean records that clearly separate the two. For example, note the purpose of each trip (client meeting, delivery, etc.).

7. Review With a Tax Professional

If you're unsure which method is better for you, or how to calculate your deduction properly, consult a CPA or bookkeeper. A small investment in advice can lead to major tax savings.