Vehicle Deduction for Business Owners: Standard Mileage Rate vs. Actual Expenses

By Brian Giesecke, CPA/EA | Giesecke Advisory

How many times did you drive somewhere for your practice last week?

To the hospital. To a satellite office. To a meeting with your accountant. To pick up supplies.

Those miles are worth money. Real money. And most practice owners either aren't tracking them... or aren't deducting them correctly.

The vehicle deduction is one of the most straightforward tax benefits available to business owners. But "straightforward" doesn't mean people get it right. In fact, vehicle deductions are one of the most commonly botched items I see on practice owner returns.

Let's fix that.

What Driving Is Actually Deductible?

Before we get into the methods, let's make sure we're clear on what counts.

Business miles are deductible. That includes driving between your practice and another business location — a hospital, nursing home, satellite office, or surgery center. It includes driving to meet with vendors, consultants, attorneys, or advisors. It includes driving to professional conferences, CE courses, or networking events.

Commuting miles are NOT deductible. Driving from your home to your main practice location is commuting. It's personal. The IRS doesn't care how long the drive is or how much you wish it counted. Home to work, work to home — that's on you.

This is where most practice owners stop reading. But there's a nuance worth knowing.

The Home Office Exception That Changes Everything

If you have a qualifying home office — one that meets the IRS requirements for regular and exclusive business use — your home becomes a business location.

That changes the math completely.

With a legitimate home office, driving from home to your practice isn't commuting anymore. It's driving between two business locations. And that's deductible.

Think about what that means. If you live 15 miles from your practice and you make that drive 250 days a year... that's 7,500 miles. At the 2024 IRS standard mileage rate of 67 cents per mile, that's a $5,025 deduction you'd otherwise miss entirely.

This is one of the hidden benefits of the home office deduction that doesn't get enough attention. If you haven't read our post on the home office deduction, it's worth a look.

Method 1: The Standard Mileage Rate

The IRS sets a standard mileage rate each year. For 2024, it's 67 cents per mile. This rate is designed to cover all your vehicle operating costs — gas, insurance, repairs, depreciation, everything.

The math is simple. Count your business miles. Multiply by $0.67.

Example: Dr. Patel drives between her main office and a satellite location three days a week. She also makes monthly trips to two nursing homes and quarterly drives to meet with her CPA and attorney.

Her annual business mileage: 8,000 miles.

8,000 miles x $0.67 = $5,360 deduction.

That's money back in her pocket, every year, for driving she was going to do anyway.

What you CAN still deduct on top of standard mileage:

• Parking fees for business purposes
• Tolls for business travel

What you CAN'T deduct separately:

• Gas, insurance, repairs, or any other vehicle expense. The 67-cent rate covers all of it.

Method 2: The Actual Expense Method

The actual expense method works differently. Instead of a per-mile rate, you deduct a percentage of your total vehicle costs based on how much you use the vehicle for business.

Here's how it works, step by step.

Step 1: Track ALL vehicle expenses for the year. That means:

• Gas and oil
• Insurance premiums
• Repairs and maintenance
• Tires
• Registration and license fees
• Lease payments (if leasing)
• Depreciation (if you own the vehicle)

Step 2: Calculate your business use percentage. Divide business miles by total miles driven.

Step 3: Multiply total expenses by your business use percentage.

Example: Dr. Reeves drove 18,000 total miles last year. Of those, 6,000 were for business — between offices, to the hospital, and to professional events.

Business use percentage: 6,000 / 18,000 = 33%

His total vehicle expenses for the year:

• Gas: $3,600
• Insurance: $1,800
• Repairs: $1,200
• Registration: $400
• Depreciation: $5,000
• Total: $12,000

$12,000 x 33% = $3,960 deduction.

Compare that to the standard mileage method: 6,000 miles x $0.67 = $4,020.

In this case, the standard mileage rate actually wins by $60. But that's not always the case.

Side-by-Side: Which Method Wins?

The answer depends on your specific situation. Let's run a couple of scenarios.

Scenario A: Moderate miles, average vehicle costs

• Business miles: 5,000
• Total miles: 15,000
• Total vehicle expenses: $9,000

Standard mileage: 5,000 x $0.67 = $3,350 Actual expenses: $9,000 x 33% = $2,970

Standard mileage wins by $380.

Scenario B: High vehicle costs, newer luxury vehicle

• Business miles: 10,000
• Total miles: 15,000
• Total vehicle expenses: $18,000 (higher insurance, depreciation on a $60,000 vehicle)

Standard mileage: 10,000 x $0.67 = $6,700 Actual expenses: $18,000 x 67% = $12,060

Actual expenses win by $5,360.

The pattern is clear. If you have high vehicle costs — expensive vehicles, high depreciation, significant repairs — the actual expense method often comes out ahead. If your vehicle costs are average and your business miles are moderate, standard mileage usually wins or comes close.

How to Decide: A Simple Framework

For most practice owners, I recommend starting with the standard mileage rate. Here's why:

1. It's simpler. One number to track — your miles. 2. It's usually competitive with actual expenses for typical vehicles. 3. You keep the option to switch methods later (with some restrictions).

Consider actual expenses if:

• You drive an expensive vehicle with high depreciation
• Your total vehicle expenses are unusually high
• Your business use percentage is well above 50%
• You're leasing (after the first year of a lease, you must use actual expenses)

The lock-in rule you need to know: If you use the standard mileage rate in the first year you use a vehicle for business, you can switch to actual expenses later. But if you start with actual expenses, you're generally locked into that method for that vehicle.

This is important. Choose standard mileage first if you're not sure. You can always switch. Going the other direction is much harder.

Recordkeeping: The Part That Actually Matters

Here's where people get in trouble. And I mean real trouble — as in losing the entire deduction in an audit.

The IRS requires contemporaneous records for vehicle deductions. That's a fancy way of saying: you need to track your miles as you drive them. Not at the end of the month. Not at tax time. As it happens.

A proper mileage log includes four things: 1. Date of the trip 2. Starting and ending location (or destination) 3. Business purpose (visiting hospital, meeting with vendor, etc.) 4. Miles driven

That's it. But all four are required.

"I probably drove about 10,000 business miles" does not hold up. I've seen practice owners lose vehicle deductions entirely because they couldn't produce a log. The IRS doesn't accept estimates or reconstructions.

Tools That Make Tracking Easy

You don't need to write this down on paper every time you start your car. There are good tools for this.

Mileage tracking apps like MileIQ, Everlance, or Driversnote use your phone's GPS to track trips automatically. You just swipe to classify each trip as business or personal.

A simple spreadsheet works too. Four columns — date, destination, purpose, miles. Update it weekly.

A paper log in your glove box works in a pinch. Old school, but the IRS doesn't care about the format. They care about consistency and completeness.

The best system is the one you'll actually use. Pick something and stick with it.

If You're Using Actual Expenses: What to Track

Beyond mileage, you'll need receipts and records for every vehicle expense you plan to deduct. That means:

• Gas receipts (or credit card statements showing fuel purchases)
• Insurance declarations page showing annual premium
• Repair and maintenance invoices
• Registration renewal documents
• Lease agreement (if applicable)
• Vehicle purchase documentation (for depreciation calculations)

Keep these organized by year. Your accountant will need them at tax time, and you'll need them if the IRS ever asks questions.

Common Mistakes to Avoid

Deducting commuting miles. Home to your main office is not business driving. Unless you have a qualifying home office — then it changes. But be honest with yourself about whether your home office truly qualifies.

Not tracking at all. "I'll figure it out at year-end" is a recipe for losing the deduction. Start now.

Double-dipping. If you use the standard mileage rate, you can't also deduct gas, insurance, or repairs. It's one method or the other (plus parking and tolls either way).

Forgetting about it. I see this constantly. Practice owners drive to the hospital three days a week and never track a single mile. That's real money disappearing.

Over-estimating. Going the other direction is just as bad. Inflated mileage on a return is a red flag. Stick to what actually happened.

Vehicles, Schedule C, and Your Tax Return

If you're self-employed or filing as a sole proprietor, vehicle deductions go on Schedule C (Profit or Loss From Business). There's a specific section — Part IV — dedicated to vehicle information.

If your practice is an S-corp, vehicle deductions can work differently depending on whether the vehicle is owned by the business or by you personally. An accountable plan is usually the cleanest approach for S-corp owners — talk to your CPA about the best setup.

The IRS also requires you to answer questions about your vehicle use on Form 4562 (Depreciation and Amortization) if you're using actual expenses, and on Schedule C regardless of method. These forms ask things like: Do you have evidence to support your deduction? Is the evidence written? Do you have another vehicle available for personal use?

Answer these honestly. They're designed to flag questionable claims.

Your Next Step

Here's what I'd suggest...

If you're not tracking mileage today, start. Download an app. Put a notebook in your car. Set a weekly reminder to log your trips. Whatever works for you — just start.

If you ARE tracking, take a few minutes to run both methods. Standard mileage rate versus actual expenses. See which one gives you a better result. You might be surprised.

And if you're not sure whether you qualify for the home office deduction — which could turn your daily commute into deductible business miles — it's worth looking into. The combination of a home office deduction and a vehicle deduction is one of the most powerful and commonly missed pairings in tax planning for practice owners.

I'm curious... are you tracking your mileage? What method do you use? I'd love to hear how you handle it.