Vehicle Deductions for Business Owners: Mileage vs. Actual Expenses

Using your personal vehicle for business is one of the most common — and most underutilized — tax deductions for small business owners. Here's how to claim it correctly and maximize your deduction.

Deduct a flat rate per business mile driven. For 2024, the IRS standard mileage rate is 67 cents per mile.

Example: 10,000 business miles × $0.67 = $6,700 deduction.

Pros: Simple, no need to track actual expenses. Cons: May be lower than actual expenses for newer or more expensive vehicles.

Track all vehicle expenses and deduct the business-use percentage:

• Gas
• Insurance
• Registration and license fees
• Repairs and maintenance
• Depreciation (or lease payments)
• Car washes

Example: $12,000 in total vehicle expenses, 60% business use = $7,200 deduction.

Pros: Often higher deduction for expensive vehicles or high fuel costs. Cons: Requires detailed record-keeping.

Calculate both and pick the higher one — but with a catch: if you use the actual expense method in the first year you place a vehicle in service, you must continue using it for that vehicle. The standard mileage rate offers more flexibility.

Regardless of method, you must keep a mileage log that records:

• Date of each trip
• Business purpose
• Starting and ending odometer readings (or total miles)
• Destination

Apps like MileIQ or QuickBooks Online's mileage tracking make this easy.

• Commuting from home to your regular office
• Personal errands
• Trips that are primarily personal with a minor business purpose

Want to make sure you're capturing every vehicle deduction? The Gap ProAdvisors prepares business and individual tax returns with a focus on maximizing legitimate deductions. Contact us.