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Standard Mileage Rate and Vehicle Expensing Guidelines


If you can and do choose to use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year. These expenses include depreciation or lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance, and vehicle registration fees. See Choosing the standard mileage rate and Standard mileage rate not allowed, later.

You generally can use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate.

Leased Vehicles

If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. For leases that began on or before December 31, 1997, the standard mileage rate must be used for the entire portion of the lease period (including renewals) that is after that date.

If you choose to use the standard mileage rate, you are considered to have chosen not to use the depreciation methods discussed later. This is because the standard mileage rate includes an allowance for depreciation. Also, you cannot claim the section 179 deduction (discussed later) if you use the standard mileage rate. If you change to the actual expenses method in a later year, but before your car is considered fully depreciated, you have to estimate the remaining useful life of the car and use straight line depreciation. See the exception in Methods of depreciation under Depreciation Deduction, later.  You must still record mileage if you a lease a vehicle - see example mileage logs here.

When Standard Mileage Rate Is Not Allowed

You cannot use the standard mileage rate if you:

1. Use the car for hire (such as a taxi),

2. Operate two or more cars at the same time (as in fleet operations),

3. Claimed a depreciation deduction using ACRS or MACRS (discussed later) in an earlier year,

4. Claimed a section 179 deduction (discussed later) on the car,

5. Claimed actual car expenses after 1997 for a car you leased, or

6. Are a rural mail carrier who received a qualified reimbursement. (See Rural mail carriers, earlier.)

Two or more cars

If you own two or more cars that are used for business at the same time, you cannot use the standard mileage rate for the business use of any car. However, you may be able to deduct your actual expenses for operating each of the cars in your business. See Actual Car Expenses for information on how to figure your deduction.

You are not using two or more cars for business at the same time if you alternate using (use at different times) the cars for business.

The following examples illustrate the rules for when you can and cannot use the standard mileage rate for two or more cars.

Example 1. Marcia, a salesperson, owns a car and a van that she alternates using for calling on her customers. She can use the standard mileage rate for the business mileage of the car and the van.

Example 2. Tony uses his own pickup truck in his landscaping business. During the year, he traded in his old truck for a newer one. Tony can use the standard mileage rate for the business mileage of both the old and the new trucks.

Example 3. Chris owns a repair shop and an insurance business. He uses his pickup truck for the repair shop and his car for the insurance business. No one else uses either the truck or the car for business purposes. Chris can use the standard mileage rate for the business use of the truck and the car.

Example 4. Maureen owns a car and a van that are both used in her housecleaning business. Her employees use the van and she uses the car to travel to the various customers. Maureen cannot use the standard mileage rate for the car or the van. This is because both vehicles are used in Maureen's business at the same time. She must use actual expenses for both vehicles.

Interest. If you are an employee, you cannot deduct any interest paid on a car loan. This applies even if you use the car 100% for business as an employee.

Order a separate mileage log book for each of your vehicles.

Self-Employed

However, if you are self-employed and use your car in your business, you can deduct that part of the interest expense that represents your business use of the car. For example, if you use your car 60% for business, you can deduct 60% of the interest on Schedule C (Form 1040). You cannot deduct the rest of the interest expense.

If you use a home equity loan to purchase your car, you may be able to deduct the interest. See Publication 936, Home Mortgage Interest Deduction, for more information.

Personal property taxes. If you itemize your deductions on Schedule A (Form 1040), you can deduct on line 7 state and local personal property taxes on motor vehicles. You can take this deduction even if you use the standard mileage rate or if you do not use the car for business.

If you are self-employed and use your car in your business, you can deduct the business part of state and local personal property taxes on motor vehicles on Schedule C, Schedule C-EZ, or Schedule F (Form 1040). If you itemize your deductions, you can include the remainder of your state and local personal property taxes on the car on Schedule A (Form 1040).

Parking fees and tolls. In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. (Parking fees that you pay to park your car at your place of work are nondeductible commuting expenses.)

Sale, trade-in, or other disposition

If you sell, trade in, or otherwise dispose of your car, you may have a gain or loss on the transaction or an adjustment to the basis of your new car.

Rural mail carriers

If you are a rural mail carrier, you may be able to treat the amount of qualified reimbursement you received as the amount of your allowable expense. Because the qualified reimbursement is treated as paid under an accountable plan, your employer should not include the amount of reimbursement in your income. And, since the reimbursement equals the expense, you have no deduction to report on your tax return.

Quailified Reimbursement

A "qualified reimbursement" is the amount of reimbursement you receive that meets both of the following conditions.

It is given as an equipment maintenance allowance (EMA) to employees of the U.S. Postal Service.
It is at the rate contained in the 1991 collective bargaining agreement. Any later agreement cannot increase the qualified reimbursement amount by more than the rate of inflation.
See your employer for information on your reimbursement.

If you are a rural mail carrier and received a qualified reimbursement, you cannot use the standard mileage rate.

Choosing the standard mileage rate. If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Then in later years, you can choose to use either the standard mileage rate or actual expenses.

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