Standard mileage rate or actual car expenses?
By GigWorkerTax · Updated
There are two ways to deduct a car you use for work: a flat amount for each business mile, or the business share of what the car actually cost. For most delivery and rideshare drivers the mileage rate is larger and far simpler. But the choice you make in the car's first year limits what you can do later, so it is worth getting right.
The two methods
Standard mileage rate
You multiply business miles by the IRS rate. For 2026 it is $0.725 a mile from January 1 to June 30 and $0.76 from July 1, so keep your log in two halves. The rate stands in for fuel, oil, repairs, tires, insurance, registration and depreciation; you cannot deduct those as well.
Some costs come on top of the rate with either method: business parking and tolls, and, if you are self-employed, the business share of interest on a car loan and of personal property tax on the car (Publication 463).
Actual expenses
You add up what the car cost for the year (fuel, oil, repairs, tires, insurance, registration, lease payments or depreciation, garage rent) and deduct the business share: business miles divided by all miles. You need receipts for every cost and a log of total miles as well as business miles.
Comparison 1: a delivery driver
A driver puts 20,000 business miles (9,500 before July, 10,500 after) and 25,000 miles in all on a used car bought for $14,000.
| Actual car costs for the year | Amount |
|---|---|
| Fuel | $3,600 |
| Insurance | $1,800 |
| Repairs and tires | $900 |
| Registration | $250 |
| Depreciation (20% of the $14,000 cost, first year) | $2,800 |
| Total | $9,350 |
| Business share (80.0%) | $7,480 |
Standard rate: 9,500 × $0.725 + 10,500 × $0.76 = $14,868. Actual: $7,480.
The mileage rate is larger by $7,388. On $46,000 of app earnings (single, Texas), the total estimated tax is $5,425 with the mileage rate and $7,086 with actual costs.
This is the usual result for gig work: many miles in an inexpensive, fuel-efficient car. The rate pays the same per mile whatever the car cost, so the cheaper the car is to run, the further the rate is ahead.
Comparison 2: few miles in a costly car
A consultant drives 5,000 business miles and 8,000 in all, in a new car bought for $48,000.
| Actual car costs for the year | Amount |
|---|---|
| Fuel | $1,400 |
| Insurance | $2,600 |
| Repairs and tires | $300 |
| Registration | $600 |
| Depreciation (20% of the $48,000 cost, first year) | $9,600 |
| Total | $14,500 |
| Business share (62.5%) | $9,063 |
Standard rate: $3,716. Actual: $9,063, larger by $5,347. On $70,000 of income the estimated tax is $13,486 with the rate and $12,253 with actual costs.
Actual expenses win when the car is costly, the insurance is high and business miles are few, mostly because of depreciation. Depreciation of a car is capped each year for passenger vehicles, and it needs business use above 50% for the faster methods (Publication 946). Those limits did not bind in this example, but they do for more expensive cars.
The rules that lock in your choice
This is where people get caught. From Publication 463:
- A car you own: choose the mileage rate in its first year. To be able to use the standard rate for a car at all, you must use it in the first year the car is used for business. In later years you can switch to actual expenses, but depreciation must then be straight-line over the car's remaining life.
- Actual expenses first means actual expenses for good. If you take actual costs with accelerated depreciation, a section 179 deduction or bonus depreciation in the first year, you cannot use the standard rate for that car later.
- A leased car: the whole lease. If you choose the standard rate for a leased car, you must use it for the entire lease, renewals included.
- Five or more cars at once used in the business at the same time cannot use the standard rate.
So for a car you just started driving for an app, the mileage rate in year one keeps both doors open. Starting with actual costs and fast depreciation closes one.
Selling the car later
Both methods reduce the car's basis. With actual expenses, the depreciation you took does. With the standard rate, part of each mile's rate counts as depreciation; the IRS publishes that part every year with the rates. When you sell a car you used for business, a gain up to the depreciation taken is taxed as ordinary income. A driver who used a car for business for several years should expect to see this on the return for the year of the sale.
Which miles count
Neither method changes which miles are business miles (Publication 463):
- Driving between deliveries, rides or clients counts.
- Trips to buy supplies or to the bank for the business count.
- Commuting between home and a regular place of work does not. If your home is your main place of business, trips from home to other work locations count; so do trips from home to a temporary work location.
- For app drivers, many treat the miles from accepting the first order to finishing the last as business miles. Keep a log that shows where each day started and ended, so you can show how you counted.
Write the log as you go: date, start and end, miles, and purpose, or use an app that records trips. The tracker keeps a mileage log in your browser, and the mileage deduction calculator applies both 2026 rates.
Where it goes on the return
On Schedule C the car deduction goes on line 9, "Car and truck expenses", with parking and tolls. Part IV of Schedule C asks for the date the car went into service and the business, commuting and other miles. If you take actual expenses with depreciation, Form 4562 is needed too.
Before you rely on it
This page is general information for the 2026 tax year, not tax advice. GigWorkerTax is an independent site, not connected to the IRS or to any gig platform. Every figure the calculators use and its source is on the methodology page; see also the disclaimer, and talk to a licensed tax professional about your own return.
Sources: Publication 463 · IRS standard mileage rates · Publication 946 · Schedule C