Handbook / Business deductions

Vehicle expenses for the 2026 tax year: standard mileage or actual costs

Tax-year note: Tax information on this page applies to the 2026 tax year (returns filed in 2027), from IRS pages checked in November 2026. Figures and dates are labelled with their tax year where they appear. Check current IRS pages before you rely on them.

For many self-employed people, the car is one of the largest business costs: visiting clients, carrying tools, picking up supplies. The IRS offers two ways to deduct it, and the choice you make in a vehicle's first year can limit your options later. This guide compares them for the 2026 tax year, using IRS Publication 463 (2025 edition, the latest available when checked) and the IRS 2026 mileage rate announcements, checked in November 2026.

Which trips count

Only business driving is deductible. Publication 463's commuting rules, summarised in its Figure B, give the framework:

• Commuting between your home and a regular place of business is personal and not deductible.
• Temporary work locations. Trips between home and a temporary work location, generally one where work is realistically expected to last a year or less, can be deductible, subject to the publication's conditions.
• Between work locations. Driving from one client or job site to another during the day is generally deductible.
• Home as principal place of business. If your home is your principal place of business, trips from home to other work locations in the same trade are generally deductible.

Other deductible examples include trips to the bank, to buy supplies, or to meet a client.

Method 1: standard mileage rate

Multiply business miles by the IRS rate. For the 2026 tax year, the IRS set two rates:

• January 1 to June 30, 2026: 72.5 cents per mile (IR-2025-128).
• July 1 to December 31, 2026: 76 cents per mile (IR-2026-29).

Your log must therefore separate miles by date. The guide on the 2026 standard mileage rate covers the rates in detail.

Publication 463 says business parking fees and tolls can be deducted on top of the standard rate. The rate replaces fuel, repairs, insurance, depreciation and similar costs, which you cannot deduct separately.

Who cannot use it. Publication 463 lists situations where the standard rate is not allowed, including:

• operating five or more cars at the same time
• having claimed depreciation other than straight-line, a section 179 deduction or a special depreciation allowance on the car
• having claimed actual expenses after 1997 for a car you lease

First-year rule. For a car you own, you must choose the standard rate in the first year the car is available for business use. You can then use either method in later years. For a leased car, choosing the standard rate means using it for the whole lease.

Method 2: actual expenses

Add up the costs of operating the vehicle and deduct the business-use share. Publication 463 lists costs including depreciation or lease payments, registration, licenses, insurance, repairs, gas, oil, tires, garage rent, tolls and parking.

Business-use percentage. Divide business miles by total miles. Publication 463's example: 20,000 total miles, 12,000 for business, so 60% of costs are business.

Example (2026 tax year): A mobile dog groomer drives her van 20,000 miles in 2026, with 12,000 business miles, 6,000 of them before July 1. Actual costs, including depreciation, total $11,000, so the actual method gives 60% x $11,000 = $6,600. The standard rate gives 6,000 x 72.5 cents + 6,000 x 76 cents = $4,350 + $4,560 = $8,910. For her, the standard rate is larger, and she also deducts business parking and tolls.

Depreciation. Depreciation on vehicles has its own limits and rules, explained in Publication 463 and Publication 946. Publication 463 notes that if you used the standard rate in the first year and change to actual expenses later, you must use straight-line depreciation over the remaining useful life.

Choosing

The standard rate tends to suit:

• vehicles with modest running costs
• high business mileage
• people who want simpler records

Actual expenses can suit:

• expensive vehicles or vehicles with high costs
• lower mileage with high fixed costs
• people willing to keep full cost records and depreciation schedules

For a new vehicle, calculate both at the end of the first year before deciding, since that choice shapes later years.

Records

Publication 463 says you must generally keep adequate records, such as a log or diary, plus documentary evidence. For car expenses its records table lists the cost of the car and improvements, the date you started using it for business, the mileage for each business use and total miles for the year, the date of each use, the destination and the business purpose.

A practical log has one line per trip: date, start and end location, purpose and miles. Apps or a notebook both work, as long as entries are made at or near the time. Keep fuel and repair receipts even if you use the standard rate; they help if you switch methods and show the vehicle's actual use.

On your return

Sole proprietors report car and truck expenses on Schedule C, and provide vehicle information in Part IV of Schedule C or on Form 4562 as required. The guide on Schedule C explains the form.

For 2026: log every business mile by date, use 72.5 cents before July 1 and 76 cents after, compare actual costs in a vehicle's first year, and keep receipts either way.