Standard mileage vs. actual expenses: Guide to mileage deduction methods

When you drive your personal vehicle for business purposes, many of the costs involved may be tax-deductible. But how you deduct those expenses matters. The IRS allows you to choose between two methods: standard mileage rate vs. actual expenses.

Choosing the right approach can directly impact how much you save on your taxes. We break down how each method works, provide real-world examples, and offer tips for maintaining IRS-compliant records so you can claim the maximum deduction with confidence.

What is the standard mileage method?

The standard mileage rate is the dollar amount that a business can deduct for each business mile driven over the course of a year. The IRS sets the standard mileage rate annually. For the 2025 tax year, the IRS standard mileage rate is 70 cents per mile.

For reference, the standard mileage rate for 2024 was 67 cents per mile. The rate typically changes each year based on inflation and average operating costs, so it's important to verify the current IRS rate before calculating your deduction.

To use the standard mileage rate method, you’ll need to track how many miles you drive for business each year. This includes keeping a mileage log to document trips.

At the end of the year, simply multiply the number of miles driven by the standard mileage rate for the tax year. The resulting amount is the standard mileage deduction you can claim on your tax return:

# of business miles driven * IRS standard mileage rate = Deduction

What expenses does the standard mileage rate cover?

The standard mileage rate is meant to approximate all the costs associated with owning and operating a vehicle. This includes both fixed and variable costs of using a vehicle for business purposes, including:

• Fuel, including gasoline, electricity, and alternative fuels like ethanol
• Materials and supplies, including tires, oil, brake fluid, wiper fluid, and more
• Maintenance and repairs
• Vehicle depreciation
• Car washes and detailing
• Fees, including licensing and registration
• Insurance premiums
• Lease payments

Eligibility requirements

Not all vehicles qualify for the standard mileage method. To use this deduction, you must:

• Use this method for the first year in which you place the vehicle service for business
• Own or lease fewer than five vehicles used simultaneously in your business (fleet vehicles generally don’t qualify)
• Not have claimed depreciation using any method other than straight-line
• Not have claimed Section 179 or bonus depreciation on the vehicle

Recordkeeping requirements and IRS forms

The IRS requires accurate and consistent records to claim the standard mileage deduction. You’ll need a mileage log that tracks the date, purpose, destination, and miles driven for each business-related trip. You can use a physical logbook, a spreadsheet, or a digital mileage tracking app to stay organized.

If you’re self-employed, you can typically claim mileage deductions on Schedule C (Form 1040). Otherwise, refer to IRS Publication 463 for full guidance on business travel and vehicle-related deductions.

What is the actual expenses method?

The actual expenses method lets you deduct the portion of your total vehicle expenses that relates to business use. It’s often a better fit for those with high vehicle costs, like expensive repairs, lease payments, or insurance, especially if business mileage is relatively low.

To use this method, you need to track all car-related costs throughout the year, as well as keep a detailed mileage log to calculate the business-use percentage of your vehicle. To start, divide the number of business miles driven by the total miles driven for the year:

Business miles / Total miles = Business use percentage

Add up all these costs, and then multiply the total by your business use percentage to find your deduction:

Total vehicle expenses * Business use percentage = Deduction

It’s important to note that whether you take the standard mileage deduction or the actual expenses deduction, only use it for business travel. You can’t deduct mileage for everyday commuting.

Recordkeeping requirements and IRS forms

The actual expenses method involves more extensive documentation than the standard mileage method. You’ll need to save receipts for all business-related vehicle costs, including fuel, maintenance, repairs, insurance premiums, registration fees, and other qualifying expenses.

You also need to log your mileage to determine your business-use percentage. Track each trip’s date, business purpose, and the distance traveled.

Similar to the standard mileage method, you’ll report these deductions on Schedule C (Form 1040) if you’re self-employed, and businesses should reference Publication 463. If you plan to deduct depreciation, including Section 179 or bonus depreciation, you may also need to file Form 4562.

Which method saves more? Example scenarios

The right deduction method depends on your driving habits, vehicle costs, and how much time you want to spend tracking expenses. To help you decide, here are two real-life examples that compare the standard mileage and actual expenses methods side by side:

Example 1: Rideshare driver with high mileage and low expenses

Say you drive full-time for a rideshare company. In 2025, you drive 25,000 miles for business and spend $7,500 total on vehicle expenses (like gas, oil changes, and insurance payments). You drive 30,000 total miles during the year.

• Standard mileage method:
  • 25,000 business miles * $0.70 per mile = $17,500 deduction
• Actual expenses method:
  • 25,000 business miles / 30,000 total miles = 83% business use
  • $7,500 total expenses * 83% business use = $6,225 deduction

The best option in this example is the standard mileage method. You drive a lot but don’t spend much on upkeep, so the standard mileage rate gives you a much higher deduction.

Example 2: Small business owner with low mileage and high costs

You run a consulting business and occasionally use your vehicle for client meetings. In 2025, you drive 3,000 miles for business out of 10,000 total miles. Your total vehicle expenses come to $12,000 due to a high lease payment and major repairs.

• Standard mileage method:
  • 3,000 business miles * $0.70 per mile = $2,100 deduction
• Actual expenses method:
  • 3,000 business miles / 10,000 total miles = 30%
  • $12,000 total expenses * 30% = $3,600 deduction

In this example, the best choice is the actual expenses method. Since your mileage is low but your costs are high, you save more by itemizing actual vehicle expenses.

If you’re unsure which deduction method makes the most sense for your situation, or if you’ve depreciated a vehicle in prior years, it’s a good idea to consult a qualified tax professional.

Can you switch between the standard mileage rate and actual expenses method?

Generally speaking, you can switch back and forth between using both methods. However, the IRS has a few important rules that limit your flexibility.

You must use the standard mileage method in the first year your vehicle is placed in service if you want the option to switch to actual expenses later. If you use the actual expenses method in the first year, you generally can’t switch to the standard mileage method for that vehicle in future years, especially if you claimed accelerated depreciation, Section 179, or bonus depreciation.

If you’re leasing a vehicle and start with the standard mileage rate, you’re required to use it for the entire lease term, including renewals.

What are the pros and cons of standard mileage vs. actual expenses?

There’s no single answer to whether the standard mileage rate method or the actual expenses method is better. Each has its pros and cons, and the best choice depends on your business’s driving habits, vehicle costs, and how much time you're willing to spend on recordkeeping.

Pros and cons of the standard mileage method

The standard mileage method is straightforward and requires minimal effort to maintain. It’s ideal for those who drive frequently for business but have relatively low vehicle expenses.

Pros:

• Simple to use; just track miles driven for business
• Requires less recordkeeping; no need to save expense receipts
• Lower chance of IRS scrutiny
• Best fit for high-mileage, low-maintenance vehicles

Cons:

• Must use this method in the first year the vehicle is used if you want to switch later
• Doesn’t account for high actual costs; may lead to a smaller deduction
• Not available if you’ve used accelerated depreciation methods or have a large fleet of vehicles

Pros and cons of the actual expenses method

The actual expenses method allows you to deduct real, itemized vehicle costs, but it has heavier documentation requirements.

Pros:

• May result in a larger deduction, especially with high-cost vehicles or low mileage
• Reflects your true business vehicle expenses
• Ideal if you’ve had major repairs, high insurance premiums, or costly lease payments

Cons:

• Requires detailed recordkeeping for all expenses (fuel, maintenance, insurance, etc.)
• More complex to calculate and manage
• Higher audit risk if documentation isn’t thorough or consistent

Ramp makes tracking vehicle expenses easy

Whichever method you choose to calculate your business vehicle deduction, it’s important you have an accurate way to track both mileage and business expenses.

Ramp’s comprehensive expense management software helps with both, providing mileage tracking, recordkeeping, expense reporting, and more in a single platform:

• Accurate mileage calculations: Ramp integrates directly with Google Maps, making it easier than ever to accurately track and log mileage
• Easy receipt collection: Employees are prompted to scan and save receipts whenever they submit a reimbursement request, protecting your business from the risks of a tax audit—especially if you claim actual expenses for business travel
• Automated expense reporting: With Ramp, you can manage your entire expense management and reimbursement program all in one place

Watch a demo video and see why businesses that use Ramp save an average of 5% a year across all spending.