Standard Mileage or Actual Expenses? The First-Year Car Rule Most Owners Miss

Standard mileage vs actual car expenses for small business, by Robert Allen Bautista, Kansas City tax preparerMost owners ask "what can I deduct for my car?" The better question is which method you're using, and whether you picked it correctly the first year.

The IRS gives you two choices. The standard mileage rate (70 cents a mile for 2025) covers gas, insurance, repairs and depreciation in one number. Actual expenses means adding up real costs and deducting the business-use percentage. Parking and tolls for business trips count on top of either one.

Here's the trap. If you own the car and want the standard rate, you generally have to use it in the first year the car is in service for your business. Start with actual expenses, and the standard rate is generally gone for that car for good. Start with the standard rate, and you can switch to actual expenses later.

Three quick rules:

  • Commuting from home to your regular workplace is never deductible.
  • Keep a mileage log as you go: date, destination, business purpose, miles.
  • Run both methods every year, even if you plan to use the standard rate.

I walk through a full worked example, the leased-car rule, and the depreciation details in the complete guide: Your Car Is a Tax Decision: Standard Mileage vs. Actual Expenses.

Robert Allen Bautista is a Kansas City tax preparer and accountant, PwC alum, and author of The Small Business Tax Code, Unlocked. Source: IRS Publication 463. General information, not advice for your situation. 

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