Local Business Transportation Deduction: Mileage, Costs, and Records

The local business transportation deduction lets self-employed people, sole proprietors, and — starting in 2026 — employees with unreimbursed costs write off the expense of getting around for work within their tax home area. For 2026, the IRS standard mileage rate is 72.5 cents per business mile.¹ If you’d rather track real costs, you can deduct a proportional share of gas, insurance, repairs, and depreciation instead. Either way, the trip has to serve a business purpose and you have to be able to prove it.

What Counts as Deductible Local Transportation

Deductible local transportation covers the ordinary costs of getting around for work within the general area of your tax home. Driving between job sites during the day, meeting a client at their office or a restaurant, and heading to a professional conference across town all qualify.² The expense has to be ordinary — common in your line of work — not exotic.

The biggest trap here is commuting. Driving from your house to your regular workplace is a personal expense, full stop. Federal law specifically bars deductions for travel between your residence and your place of employment.³ Once you arrive at your first business location for the day, though, any later trips to other work-related destinations count as deductible transportation. A plumber who drives from home to the shop and then to three customer houses can deduct the miles between the shop and those houses, but not the initial drive from home.

Mixing personal errands into a business trip doesn’t ruin the deduction, but it does complicate it. Only the business portion qualifies, and you need a reasonable basis for splitting the two.²

The Home Office Exception

The commuting rule has one valuable exception. If a home office qualifies as your principal place of business, every trip from home to another work location in the same trade or business becomes deductible, including the first trip of the day.⁴ Without a qualifying home office, that first drive out of the driveway is plain commuting.

To qualify, you have to use a dedicated space in your home exclusively and regularly for administrative or management work — billing customers, keeping books, ordering supplies, setting up appointments — and you can’t have another fixed location where you handle a substantial amount of that same work.⁴ Meeting clients elsewhere is fine. The test focuses on where the back-office tasks happen. A contractor who does all invoicing and scheduling from a desk at home before driving to job sites meets this test easily.

Temporary Work Locations

Even without a home office, you can deduct daily transportation to a temporary work site outside your metropolitan area if you have no regular workplace, as long as the assignment is realistically expected to last one year or less.⁵ The moment your expectation changes and you believe you’ll be there for more than a year, the deduction stops going forward — even if you end up leaving sooner. The IRS looks at what you realistically expected at the time, not how things played out.

Standard Mileage Rate or Actual Expenses

The IRS gives you two ways to calculate vehicle deductions, and the right choice depends on your car, your mileage, and your appetite for recordkeeping.

Standard Mileage Rate

The simpler option. Multiply your business miles by 72.5 cents for 2026, and that’s your deduction.¹ The rate rolls depreciation, gas, insurance, and maintenance into one figure, so you don’t need receipts for those items. Parking and tolls still get deducted separately.

There’s an important timing rule. If you own the vehicle, you have to pick the standard mileage rate in the first year you use it for business. After that, you can switch between methods year to year.⁶ With a leased vehicle, choosing the standard rate locks you into it for the entire lease, including renewals.² If you run five or more vehicles at the same time — a small fleet — the standard rate isn’t available at all.

Actual Expense Method

This approach captures the real costs of running the vehicle: gas, oil, tires, repairs, insurance, registration fees, lease payments, and depreciation.⁶ It takes more bookkeeping since you need receipts for everything, but it often produces a bigger deduction for people with expensive vehicles or high maintenance costs. Owners of older cars that guzzle gas or need frequent repairs tend to come out ahead here. Choosing actual expenses for a leased vehicle also locks you in for the length of the lease.²

When the same car handles both work and personal driving, you allocate under the actual expense method based on the ratio of business miles to total miles for the year. Drive 20,000 miles total with 12,000 for business, and 60% of every operating cost is deductible.² With the standard mileage rate, that math is built in — personal miles never enter the calculation.

High-mileage drivers with fuel-efficient cars usually do better with the standard rate because 72.5 cents per mile adds up quickly without receipt headaches. Run the numbers both ways in year one. Whichever you don’t pick for an owned vehicle, you can revisit next year.

Depreciation and Section 179 for Business Vehicles

Under the actual expense method, depreciation is where the largest deductions live. Most business vehicles use the Modified Accelerated Cost Recovery System (MACRS), which spreads the cost over several years.⁶

For regular passenger cars placed in service in 2026, the IRS caps annual depreciation regardless of the vehicle’s actual cost. With bonus depreciation applied, the first-year limit is $20,300. Without bonus depreciation, it drops to $12,300. Subsequent years are capped at $19,800 in year two, $11,900 in year three, and $7,160 for each year after.⁷

Section 179 offers a different route. Instead of spreading the deduction over years, you can expense the cost of a qualifying vehicle upfront in the year you buy it and place it in business service. For heavier vehicles with a gross vehicle weight rating over 6,000 pounds but under 14,000 pounds — many full-size SUVs and trucks — the Section 179 deduction for 2026 is capped at $32,000. Vehicles above 14,000 pounds face no Section 179 cap at all, which is why so many business owners buy heavy-duty trucks. The vehicle must be used more than 50% for business to qualify. Depreciation and Section 179 claims get reported on Form 4562.⁸

Parking, Tolls, and Public Transit

Vehicle mileage isn’t the whole picture. Tolls and business-related parking fees are deductible on top of whichever vehicle method you use — the standard mileage rate doesn’t absorb them. Bus, train, taxi, and rideshare fares for business trips also qualify.² An Uber to a client meeting is deductible the same way business miles are.

One boundary: parking at your own regular workplace is commuting, not a business expense. The deduction only applies to parking you pay at a business destination like a client’s building or a conference venue.

Who Can Claim These Deductions in 2026

Self-employed individuals and sole proprietors have always had straightforward access to local transportation deductions through Schedule C. But 2026 marks a real shift for employees. The Tax Cuts and Jobs Act suspended the deduction for unreimbursed employee business expenses from 2018 through 2025. That suspension expires on December 31, 2025, so employees who itemize can once again claim unreimbursed business transportation costs starting with their 2026 returns.⁹ These expenses are subject to a 2% adjusted gross income floor. Only the amount above 2% of your AGI is deductible.

Some employee categories were never affected by the TCJA suspension and could claim throughout: Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses. They file Form 2106 to calculate the deduction.¹⁰ If your employer reimburses your transportation costs under an accountable plan, you can’t deduct those same expenses. The deduction only applies to costs you pay out of pocket without reimbursement.

Records You Need to Keep

The IRS takes documentation for vehicle deductions more seriously than for most other business expenses. You need a contemporaneous log, meaning you record trips as they happen, not reconstructed from memory in April. Each entry should capture the date, destination, business purpose, and odometer readings at the start and end of the trip.² If you visited a person, note who they are and the business relationship.

Under the actual expense method, you also need receipts for gas, repairs, insurance, and every other cost. For depreciation, keep the purchase contract showing the vehicle’s original cost and the date you placed it in service.² Digital mileage tracking apps can automate much of this and produce reports that satisfy the written-log requirement, but review what the app records. Autopilot tracking sometimes picks up personal trips and labels them as business.

Hang on to these records for at least three years from the date you file the return.¹¹ If you claimed depreciation, keep the purchase and depreciation records for as long as you own the vehicle, plus three years past the return that reports its final disposition.

If you can’t substantiate your transportation deductions during an audit, the IRS will disallow them. The burden of proof is on you.¹² This is the most common way people lose vehicle deductions: the trips were real, but the records weren’t kept. A 20% accuracy-related penalty can also apply to the resulting underpayment if the IRS finds negligence or a substantial understatement.¹³

Where to Report the Deduction

Where you report depends on how you earn the income:

Self-employed and sole proprietors report car and truck expenses on Schedule C (Form 1040), line 9. Non-vehicle transportation costs like bus fares and train tickets go on line 27b.¹⁴
Farmers report transportation related to agricultural operations on Schedule F (Form 1040).
Employees with unreimbursed expenses use Form 2106 to calculate the deduction, which flows to Schedule A as an itemized deduction subject to the 2% AGI floor.¹⁰

If you claimed depreciation or a Section 179 deduction on the vehicle, attach Form 4562.⁸ Electronic filing systems will prompt you for mileage totals and business-use percentages to check your math. If you file on paper, confirm every supporting schedule is included. A missing form can delay processing and invite unwanted attention.

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. Publication 463, Travel, Gift, and Car Expenses
3
Office of the Law Revision Counsel. 26 USC 274 – Disallowance of Certain Entertainment, Etc., Expenses
4
Internal Revenue Service. Publication 587, Business Use of Your Home
5
Internal Revenue Service. Topic No. 511, Business Travel Expenses
6
Internal Revenue Service. Topic No. 510, Business Use of Car
7
Internal Revenue Service. Revenue Procedure 2026-15
8
Internal Revenue Service. Instructions for Form 4562
9
Congress.gov. Expiring Provisions in the Tax Cuts and Jobs Act (TCJA, P.L. 115-97)
10
Internal Revenue Service. Form 2106, Employee Business Expenses
11
Internal Revenue Service. How Long Should I Keep Records
12
Internal Revenue Service. Burden of Proof
13
Internal Revenue Service. Accuracy-Related Penalty
14
Internal Revenue Service. Instructions for Schedule C (Form 1040)