How Does Mileage Deduction Work: IRS Rates, Methods, and Records

Here’s how the mileage deduction works: if you drive your own vehicle for business and you’re self-employed, you can subtract those miles from your taxable income using one of two IRS methods. The simpler one pays you a flat rate for every business mile — 72.5 cents in 2026, up from 70 cents in 2025.¹ The other totals what you actually spent to run the vehicle and multiplies by your business-use percentage. Both methods reduce your income tax, and for self-employed filers, both also reduce the 15.3% self-employment tax.

Who Can Claim the Deduction

Self-employed workers — freelancers, independent contractors, sole proprietors, gig drivers — deduct business mileage on Schedule C.

Regular W-2 employees generally cannot. Federal law eliminated the itemized deduction for unreimbursed employee expenses, and the One, Big, Beautiful Bill Act made that change permanent.² Four narrow categories of employees still qualify:

Armed Forces reservists
Qualified performing artists
Fee-basis state or local government officials
Employees with impairment-related work expenses

These employees file Form 2106 and take the deduction as an adjustment to income rather than as an itemized deduction.³ If you’re an ordinary W-2 employee and none of those apply, your only path to recover business driving costs is your employer’s reimbursement program, not your tax return.

Which Miles Actually Count

The IRS separates business driving from personal driving with a hard line, and that line surprises people.

What Qualifies as Business Miles

Driving between work sites during the day, going to meet clients or customers, and running work errands like picking up supplies all count.⁴ If you travel away from your tax home overnight for work, miles driven at your destination also qualify.⁵

Commuting Never Counts

The drive from home to your regular workplace and back is a personal expense, no matter how long it is or what work you do on the way. The IRS treats your “tax home” as the general area of your main place of business, and the daily trip in and out is personal.⁶

Temporary Work Locations

If you have a regular workplace and drive to a temporary job site in the same line of work, the round-trip miles from home to that temporary location are deductible. The assignment has to be realistically expected to last one year or less. If it’s expected to run longer, that location becomes your new tax home and the drive becomes a nondeductible commute.⁴

The Home Office Changes Everything

If you have a qualifying home office that serves as your principal place of business, your home is a business location. Every trip from there to a client, a job site, or another work location in the same business counts as business mileage, not commuting. The office has to meet the IRS test: a space used regularly and exclusively as your main place of business.⁶ For many freelancers and remote workers, this single rule is the largest source of deductible miles, and it gets missed constantly.

The Standard Mileage Rate Method

You multiply your business miles by the IRS rate. For 2026, that’s $0.725 per mile.¹ The rate rolls gas, insurance, maintenance, and depreciation into one number. Drive 12,000 business miles and your deduction is $8,700. Tolls and parking fees for business trips get added on top of the mileage total.

One catch that surfaces later: 35 cents of every mile is treated as depreciation. When you sell or trade in the vehicle, you reduce your cost basis by that accumulated depreciation, which can increase any taxable gain on the sale.

To use the standard rate, you have to choose it in the first year the vehicle is available for business use. You can start with actual expenses and switch to the standard rate later, but if you ever claim accelerated depreciation, a Section 179 deduction, or bonus depreciation on that vehicle, the standard rate is off the table for it permanently.⁷ You also can’t use the standard rate if you run five or more vehicles at the same time as a fleet, or if you previously used actual expenses on a leased vehicle after 1997.

The Actual Expense Method

Instead of a flat rate, you add up what the vehicle actually cost you to operate. Deductible costs include gas, oil, tires, repairs, insurance, registration fees, loan interest, lease payments, and depreciation.⁷ If the vehicle serves both personal and business use, you multiply total expenses by your business-use percentage.⁴

This method usually pays off when the vehicle is expensive to run: heavy repair bills, high fuel costs, a costly lease. The trade-off is that you have to track and keep every receipt for the whole year.

Owned vehicles can be depreciated under this method, but there are annual caps for passenger vehicles. For a car placed in service in 2026, first-year depreciation maxes out at $20,300 with bonus depreciation or $12,300 without it.⁸

Which Method to Pick

Neither one always wins. The standard rate tends to come out ahead when the vehicle is paid off, fuel-efficient, and cheap to maintain, and it spares you from tracking every receipt. Actual expenses tend to win when the vehicle is expensive or high-maintenance, when you carry a large loan or lease payment, or when your business-use percentage is very high.

The safe move in year one is to keep every receipt regardless of your plan, run the math both ways, and then decide. Remember that the first-year decision matters: choosing actual expenses with accelerated depreciation locks you out of the standard rate on that vehicle forever.

Medical, Charitable, and Moving Miles

Business miles aren’t the only kind the IRS recognizes. For 2026:¹

Medical miles: 20.5 cents per mile for driving to appointments, treatments, or prescription pickups. You can only claim this if you itemize and your total medical expenses exceed 7.5% of your adjusted gross income.
Charitable miles: 14 cents per mile driving in service of a qualified charity. This rate is set by statute and rarely changes. Parking and tolls can be added on top.
Moving miles: 20.5 cents per mile for active-duty military members moving under official orders.²

For charitable driving, the IRS requires that your volunteer work be a genuine and substantial duty, and the driving must be unreimbursed and directly connected to the services you provided.⁹

What the IRS Wants in Your Records

The tax code requires you to substantiate four things for each business trip: the amount, the time and place, the business purpose, and the business relationship of anyone you visited.¹⁰ In practice, each entry in your log should include:

Date of the trip
Starting and ending locations
Business purpose (client meeting, supply pickup, site visit)
Miles driven, from odometer readings or a GPS record

Records have to be contemporaneous, meaning created at or near the time of the trip. A log reconstructed from memory at tax time is exactly what the IRS rejects during audits. Most mileage deductions that fall apart in an audit fall apart here: the driving was legitimate, but nothing was written down.

GPS-based mileage tracking apps produce timestamped, location-verified records automatically and are accepted by the IRS. If you’re using the actual expense method, save every fuel receipt, repair invoice, insurance statement, and registration renewal alongside your log.

Keep the records for at least three years after the return’s filing date, which is how long the IRS has to assess additional tax.¹¹ If you underreported income by more than 25%, that window extends to six years.

Where the Deduction Goes on Your Return

Self-employed filers put vehicle expenses on Line 9 of Schedule C (Form 1040). Part IV of the same form asks you to disclose total business miles, commuting miles, and other personal miles for the year.¹² The deduction reduces your net business profit, cutting both income tax and self-employment tax.

The narrow group of W-2 employees who still qualify use Form 2106 and carry the result to Schedule 1 as an adjustment to gross income.⁴ Both forms want total miles across all categories, not just business miles. Don’t attach your mileage log to the return itself. Keep it in your own files in case the IRS asks for it.

What Happens If You Get It Wrong

Claiming miles you can’t substantiate isn’t a low-risk gamble. If an audit finds your records inadequate, the deduction is disallowed entirely. You then owe the original tax plus interest running from the filing date.

On top of that, the IRS can impose a 20% accuracy-related penalty on the underpaid tax if it finds you were negligent or disregarded the rules.¹³ Negligence includes failing to make a reasonable attempt to comply, and “I meant to keep a log” lands there. Inflating miles, counting personal errands as business, or fabricating entries can push a case into fraud territory, where consequences get considerably worse.

Log every trip as it happens. A consistent, contemporaneous record is the strongest defense you have if the IRS ever asks questions.

1
Internal Revenue Service. IRS Sets 2026 Business Standard Mileage Rate at 72.5 Cents Per Mile, Up 2.5 Cents
2
Internal Revenue Service. 2026 Standard Mileage Rates Notice 2026-10
3
Internal Revenue Service. Instructions for Form 2106 (2025)
4
Internal Revenue Service. Publication 463 (2025), Travel, Gift, and Car Expenses
5
Internal Revenue Service. Topic No. 511, Business Travel Expenses
6
Internal Revenue Service. Revenue Ruling 99-7
7
Internal Revenue Service. Topic No. 510, Business Use of Car
8
Internal Revenue Service. Rev. Proc. 2026-15
9
Internal Revenue Service. Tax Tips You Should Know if You Have Charity-Related Travel Expenses
10
Office of the Law Revision Counsel. 26 US Code 274 – Disallowance of Certain Entertainment, Etc., Expenses
11
Internal Revenue Service. How Long Should I Keep Records?
12
Internal Revenue Service. 2025 Instructions for Schedule C (Form 1040)
13
Office of the Law Revision Counsel. 26 US Code 6662 – Imposition of Accuracy-Related Penalty on Underpayments