Standard mileage rate vs actual car expenses: which is better?

If you use your car for business, you can deduct its cost in one of two ways. Most gig drivers do better with the standard mileage rate, but not everyone does.

Method 1: Standard mileage rate

Multiply your business miles by the IRS rate. For 2026 that’s 72.5¢ per mile from January 1 to June 30, and 76¢ per mile from July 1.

• Simple. You need a mileage log, not receipts for every oil change.
• Covers gas, oil, repairs, tires, insurance, registration and depreciation.
• Still deductible on top: business parking, tolls, and the business share of car loan interest and personal property tax on the car.

Method 2: Actual expenses

Add up what the car really cost you, then multiply by your business-use percentage (business miles ÷ total miles).

Costs you can include: gas, oil, repairs, tires, insurance, registration, lease payments, garage rent and depreciation.

• More records. You need receipts and a mileage log to prove the business percentage.
• Can win for expensive, heavily used or low-MPG vehicles, or in a year with big repairs.

A quick comparison

A driver puts 20,000 business miles on a car, out of 25,000 total (80% business use), split evenly across 2026.

• Standard rate: 10,000 × $0.725 + 10,000 × $0.76 = $14,850
• Actual expenses: say the car cost $11,000 for the year in gas, insurance, repairs and depreciation. At 80% that’s $8,800.

Here the standard rate wins by more than $6,000. That’s typical for efficient cars driven a lot.

The rules that lock you in

• Owned car: to use the standard rate, you generally must choose it in the first year you use the car for business. After that you can switch between methods from year to year, but once you switch to actual expenses, depreciation rules limit going back.
• Leased car: if you choose the standard rate, you must use it for the whole lease.
• Fleets: you can’t use the standard rate if you use five or more cars for business at the same time.

When in doubt in your first year, the standard rate keeps both options open later.

Find your deduction with the mileage calculator, or see what you really earn per hour with the driver pay calculator.