This is general information, not individual tax advice — the right treatment depends on your specific situation.
Every business owner who drives for work eventually asks the same question: how much of that driving can I actually deduct? The answer depends on which method you use, how carefully you track your miles, and what kind of vehicle you drive. Here is what is actually deductible in 2026 — and the recordkeeping rule that determines whether the IRS accepts your claim at all.
Two Ways to Deduct: Standard Mileage vs. Actual Expenses
The IRS gives you a choice between two methods for deducting the business use of a vehicle. The standard mileage rate lets you multiply your business miles by an IRS-set cents-per-mile rate, which is meant to cover gas, maintenance, insurance, and depreciation in one number. The actual expense method instead has you total your real costs — fuel, repairs, insurance, registration, lease payments or depreciation — and deduct the percentage that matches your business-use share of total miles driven. Most owners of ordinary sedans, SUVs used moderately, or gig-economy vehicles find the standard mileage rate simpler and often just as favorable; owners of more expensive vehicles or those with high actual costs sometimes come out ahead with actual expenses.
The 2026 Standard Mileage Rates
For 2026, the IRS set the business standard mileage rate at 72.5 cents per mile, up 2.5 cents from 70 cents in 2025. The rate for medical and qualifying active-duty moving purposes is 20.5 cents per mile, and the charitable-use rate remains fixed by statute at 14 cents per mile. Of the 72.5-cent business rate, 35 cents per mile is treated as depreciation for purposes of reducing your basis in the vehicle — a detail that matters if you later switch methods or sell the vehicle. Because these rates are set annually and can move up or down, always confirm the current-year rate before filing.
What the Actual-Expense Method Covers (and Its Limits)
Under actual expenses, you can deduct your business-use percentage of gas, oil, repairs, insurance, registration fees, lease payments, and depreciation. Depreciation, however, is capped for most passenger vehicles under the Section 280F "luxury auto" limits, which set a maximum first-year, second-year, and following-year depreciation deduction regardless of what the vehicle actually cost — these dollar caps are indexed and updated by the IRS each year, so the applicable figures depend on the year the vehicle was placed in service. Trucks, vans, and SUVs with a gross vehicle weight rating above 6,000 pounds are generally exempt from those cap tables, which is why many self-employed people who drive heavier vehicles lean toward the actual-expense method paired with bonus depreciation.
Locking In Your Method — and Why Leased Vehicles Are Different
You do not get to switch back and forth year to year at will. If you want the option to use either method over time, you must choose the standard mileage rate in the first year the vehicle is available for business use; only then can you elect actual expenses in a later year. Choose actual expenses first (including any accelerated depreciation), and you are generally locked into that method for the life of the vehicle. Leased vehicles have their own rule: if you use the standard mileage rate on a lease, you must use it for the entire lease term, including any renewal.
What Counts as Business Mileage (Commuting Doesn't)
Ordinary commuting — the drive from your home to your regular place of business — is personal mileage and is never deductible, no matter how far it is. Deductible business mileage generally includes trips between job sites, drives to meet clients or vendors, runs to the bank or post office for the business, and travel to a temporary work location. If you have a qualifying home office that is your principal place of business, trips from that home office to other business destinations can count as business mileage rather than commuting — a distinction worth getting right, since it is one of the most common areas the IRS scrutinizes.
The Recordkeeping Rule That Makes or Breaks Your Deduction
Whichever method you use, the deduction only survives an audit if it is backed by a contemporaneous mileage log: the date of each trip, the business purpose, the destination, and the miles driven, recorded at or near the time of the trip rather than reconstructed months later. A mileage app or a simple notebook both work; what matters is that the record exists and is consistent with your other business records. Without it, even a mathematically correct deduction can be disallowed.
How VarStan Helps
Vehicle deductions look simple until you are staring at a lease, a truck over 6,000 pounds, or a home office that changes the commuting rules — and the wrong call compounds every year you drive the vehicle. VarStan helps clients choose the method that fits their vehicle and business, sets up a mileage-tracking habit that survives an audit, and folds the numbers correctly into your annual return. If you are not sure which method you are even using right now, that is a quick and worthwhile conversation to have.