Vehicle Deductions: Standard Mileage vs. Actual Expenses

Vehicles are usually a top-three deduction for home service businesses, but most owners are using the wrong method for their situation — or worse, they're not tracking enough to use either one properly. Here's how to think about it.

Standard mileage

The IRS publishes a per-mile rate every year (67¢ in 2024, expected to move again in 2026). Multiply business miles by the rate and that's your deduction. Simple, low paperwork, favors vehicles that are cheap to own and driven a lot.

Actual expenses

Add up everything you actually spent on the vehicle — fuel, insurance, repairs, depreciation, interest, registration — then multiply by the percentage of business use. Favors heavy work trucks, expensive vehicles, and situations where you want to take Section 179 or bonus depreciation in the first year.

The lock-in rule

If you want to use standard mileage on a vehicle, you have to elect it in the first year you use the vehicle for business. You can switch to actual expenses later. But if you start with actual expenses, you're locked in for the life of that vehicle. That asymmetry matters — we usually recommend starting with standard mileage on new vehicles unless there's a clear reason to go the other way.

What to document

• A contemporaneous mileage log (not reconstructed at year-end).
• Dates, starting and ending odometer, business purpose, total miles.
• Receipts for fuel, repairs, insurance if you're using actual expenses.
• Annual odometer reading to establish total miles driven.

Vehicle deductions are one of the most commonly challenged items in an audit — not because they're aggressive, but because the documentation is often thin. Good records turn a challenged deduction into a five-minute conversation.