If you drive for work, your vehicle is often one of your largest deductions. The IRS gives you two methods to claim it on Schedule C, and the one you pick can meaningfully change your tax bill.
The standard mileage method
You multiply your business miles by the IRS standard mileage rate for the year. It is simple and requires only a reliable mileage log showing the date, destination, purpose, and miles for each business trip.
This method tends to win for drivers with fuel-efficient, lower-cost vehicles who rack up a lot of business miles.
The actual expense method
You total your real vehicle costs — fuel, insurance, repairs, maintenance, registration, lease payments or depreciation — and deduct the business-use percentage based on the share of miles driven for work.
This method tends to win for expensive vehicles, heavy repair years, or vehicles with high operating costs.
How to choose
A key rule: if you want to use the standard mileage rate for a vehicle, you generally must choose it in the first year the vehicle is used for business. After that you may be able to switch to actual expenses, but not always back again.
The practical approach is to keep a mileage log AND save vehicle receipts, then calculate both ways and take the larger deduction. Our free templates include categories for both so you can track whichever you need.
This guide is educational and does not constitute tax advice. For preparation and IRS representation, our sponsor Arc & Ledger Accounting is a firm of IRS Enrolled Agents.