Standard Mileage Rate: What You Can (and Can’t) Deduct for Business Vehicle Use
- Christian Wolff
- Sep 10
- 5 min read
Updated: Sep 18
If you use your personal vehicle for business, the IRS offers two primary ways to deduct related expenses:
Standard Mileage Rate
Actual Expense Method
For many self-employed individuals, gig workers, and small business owners, the standard mileage rate offers a simpler, cleaner way to claim deductions. However, even if you choose this method, there are several additional deductions that are often overlooked.
This guide outlines how the standard mileage rate works for 2025 and how to maximize your tax benefits.
2025 Standard Mileage Rate
For the 2025 tax year, the IRS standard mileage rate for business use is:
70 cents per mile (Applies from January 1 to December 31, 2025)
Example: If you drive 10,000 miles for business in 2025, your total deduction would be:
10,000 × $0.70 = $7,000
To claim this deduction, you must maintain accurate mileage logs that clearly distinguish business from personal use.
What the Standard Mileage Rate Replaces
When you use the standard mileage rate, it is assumed to include various costs associated with operating your vehicle. As a result, you cannot separately deduct the following expenses:
Gas
Oil and maintenance
Repairs
Insurance
Lease payments
Depreciation
Vehicle registration fees
These expenses are considered included in the IRS mileage rate, and separate deductions would be considered double-dipping.
Eligibility to Use the Standard Mileage Rate
If You Own the Vehicle:
You must opt for the standard mileage rate in the first year the car is used for business.
You can switch to the actual expense method in later years, but with restrictions.
If You Lease the Vehicle:
You must use the standard mileage rate for the entire lease period, including renewals.
When You Cannot Use the Standard Mileage Rate
You are not eligible to use the standard mileage rate if any of the following apply:
You operate five or more vehicles simultaneously for business.
You previously claimed actual expenses on a leased vehicle after 1997.
You used MACRS, Section 179, or special depreciation allowances.
You depreciated the vehicle using any method other than straight-line.
Built-In Depreciation: What It Means
Although you do not deduct depreciation directly with the mileage method, the IRS assumes a depreciation component is included in the rate. This reduces your vehicle’s tax basis over time.
This matters when you:
Sell or trade in the vehicle
Switch to the actual expense method
Depreciation Table (Included in Standard Mileage Rate):
Example: Cumulative Depreciation Deduction
Assume you purchased a vehicle in 2019 for $25,500 and used it for business:
Adjusted Basis: $337 ($25,500 original cost – $25,163 total depreciation)
Deducting Interest and Property Taxes (Often Missed)
Even when using the standard mileage method, the IRS allows some additional deductions. These are often missed but can result in meaningful tax savings.
1. Vehicle Loan Interest (Self-Employed Only)
If you financed your business vehicle with a loan:
You can deduct the business-use portion of the loan interest on Schedule C (Form 1040).
You cannot deduct interest tied to personal use.
Example: Total car loan interest = $1,500 Business use = 60% Deductible = $900 ($1,500 × 60%)
Note: Employees cannot deduct car loan interest under current tax law.
2. Personal Property Taxes
Many states assess annual vehicle taxes based on the value of your car. The business-use portion of these taxes is deductible, even when using the standard mileage rate.
If the vehicle is used 100% for business: deduct 100% on Schedule C.
If business use is partial: deduct the business-use percentage (e.g., 60%) on Schedule C.
The personal portion may be deductible on Schedule AÂ (if itemizing).
Important: Only value-based vehicle taxes are deductible. Fixed fees, charges based on weight or age, and license renewal fees are not.
Always ask for a copy of the DMV bill or tax notice to verify the value-based portion.
Other Deductions Allowed with the Standard Mileage Rate
The following costs can still be deducted even when using the mileage method:
Business-related tolls and parking fees
Vehicle loan interest (self-employed only)
Personal property taxes based on vehicle value
Not Deductible:
Parking at your regular workplace (commuting)
Interest if you're an employee (not self-employed)
Switching to Actual Expenses
You may switch from the mileage method to actual expenses if:
You used the standard mileage method in the first year of business use
You apply straight-line depreciation going forward
You estimate the remaining useful life of the vehicle
This switch is often beneficial for older vehicles or those with high ongoing costs.
Vehicle Deductions for Partners in Partnerships
If you're a partner in a partnership:
You can deduct business mileage as an unreimbursed partner expense (UPE)
Report the deduction on Schedule E, Page 2 (Form 1040)
Must be ordinary, necessary, and not reimbursed by the partnership
Keep detailed mileage logs
Best practice: Have the partnership agreement specifically allow unreimbursed expenses.
Vehicle Deductions for S Corporation and C Corporation Shareholders
If you are a shareholder-employee:
You cannot personally deduct vehicle expenses, even if you pay them yourself.
Instead, the corporation should set up an accountable reimbursement plan.
Submit mileage logs to the corporation.
Get reimbursed at the IRS mileage rate.
This reimbursement is:
Non-taxable to you
Fully deductible by the corporation
If the corporation does not reimburse you, you lose the deduction. This is a common mistake among S corporations.
Tip: Set up the reimbursement plan at the start of the year to avoid missed deductions.
Final Thoughts
The IRS standard mileage rate offers a streamlined method for deducting business vehicle expenses, but there are many related deductions that should not be overlooked.
Commonly Missed Deductions (Even with Mileage Method):
Business-use portion of car loan interest (self-employed)
Value-based vehicle property taxes
Business-related tolls and parking
Reimbursements through an accountable plan (for corporations)
Taking full advantage of all allowable deductions can significantly reduce your tax liability. Maintain clear documentation, accurate mileage logs, and supporting records to ensure compliance and maximize your benefit.
The information provided in this blog post is intended for general informational purposes only and should not be construed as legal or tax advice. While every effort has been made to ensure the accuracy of the information, tax laws and regulations are subject to change, and individual circumstances may vary. For personalized advice and to ensure compliance with current tax laws, it is strongly recommended that you consult with a qualified tax professional, financial advisor, or legal counsel. The author and publisher of this blog assume no responsibility for any errors or omissions, or for any actions taken based on the information contained herein.