Two ways to deduct your car
If you drive for your business (deliveries, rideshare, visiting clients, going to job sites), the IRS lets you deduct the cost of that driving in one of two ways:
- Standard mileage rate. You multiply your business miles by the IRS rate. In 2026 the rate is 72.5¢ per mile from January through June and 76¢ from July through December.
- Actual expenses. You add up what the car really cost during the year and deduct the share that matches your business miles.
Either way, the deduction goes on Schedule C, line 9, and lowers both your income tax and your self-employment tax.
1,000 business miles are worth $725 in the first half and $760 in the second.
What each method includes
The standard rate covers gas, oil, maintenance, repairs, tires, insurance, registration and depreciation. You cannot add any of those on top. What you can add:
- Parking fees and tolls on business trips.
- Business share of car loan interest, if you are self-employed. The personal share of a loan for a new car may go on Schedule 1-A: see our guide to the car loan interest deduction.
- Business share of personal property taxes on the car.
Actual expenses include gas, oil, repairs, tires, insurance, registration and license fees, garage rent, lease payments and depreciation, plus parking and tolls. You multiply the total (except business parking and tolls, which are 100% business) by your business-use percentage: business miles divided by total miles.
Two examples
Driver A does rideshare in an economical sedan and drives a lot. Driver B is a contractor with a pickup truck that is expensive to run, and drives fewer miles.
| Driver A (sedan) | Driver B (pickup) | |
|---|---|---|
| Business miles / total miles | 12,000 / 16,000 | 8,000 / 10,000 |
| Gas | $2,400 | $3,800 |
| Insurance | $1,500 | $2,400 |
| Repairs, tires and oil | $700 | $1,400 |
| Registration | $200 | $400 |
| Depreciation | $2,500 | $6,000 |
| Total car costs | $7,300 | $14,000 |
| Business-use percentage | 75% | 80% |
| Actual expense deduction | $5,475 | $11,200 |
| Standard mileage deduction | $8,912 | $5,941 |
- Driver A deducts $3,437 more with the standard mileage rate. Many miles in a cheap-to-run car usually favor the rate.
- Driver B deducts $5,259 more with actual expenses. A costly vehicle, high fuel use and fewer miles usually favor actual costs.
The standard mileage figures use the 2026 split rate, spreading each driver’s miles evenly through the year. Depreciation is an example figure: the real amount comes from Form 4562 and depends on what you paid for the car, when you started using it for business and the IRS limits for passenger cars.
To estimate your own mileage deduction and what it saves you in taxes, use our gig driver tax calculator.
The first-year rule
This is the rule that catches people off guard:
- If you own the car, you must choose the standard mileage rate in the first year you use it for business. If you do, you can switch to actual expenses in a later year and choose each year after that.
- If you start with actual expenses and depreciate the car with the usual accelerated methods, a section 179 deduction or bonus depreciation, you generally cannot use the standard rate for that car later.
- If you lease, choosing the standard rate means using it for the whole lease.
- Five or more cars used for business at the same time (a fleet) cannot use the standard rate.
So if you are unsure, starting with the standard mileage rate keeps both options open.
Keep a mileage log either way
Both methods depend on your business miles. For each trip, record the date, the miles, where you went and the business purpose, or use an app that tracks trips automatically. Write down your odometer reading on January 1 and December 31 to know your total miles.
- Commuting is not business. Driving from home to a regular place of work is personal, even if you take calls on the way.
- Trips between work locations are business: from one client to another, between deliveries, from your home office to a job site if your home office is your principal place of business.
- App miles may be only part of the story. Delivery and rideshare apps often count only the miles with an order or passenger. Driving to the pickup area and between trips can also count.
Where it goes on your return
Report the deduction on Schedule C, line 9, and answer the vehicle questions in Part IV: when you started using the car for business, business miles, commuting miles, other miles and whether you have written evidence. If you claim depreciation you file Form 4562, and you answer those vehicle questions there instead. Our Schedule C walkthrough covers the rest of the form.