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Standard mileage rate vs. actual car expenses (and the first-year rule)

Updated October 19, 2026. Educational, not tax advice.

IRS Publication 463, chapter 4, gives two ways to figure car expenses: the standard mileage rate or actual car expenses.

What the standard mileage rate replaces

Publication 463: if you use the standard mileage rate for a year, you can’t deduct your actual car expenses for that year — “depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance, or vehicle registration fees.” Business-related parking fees and tolls can still be deducted on top of it (see tolls and parking).

The first-year choice rule

• 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.”
• The choice is made by the due date (including extensions) of your return and can’t be revoked. If you switch to actual expenses in a later year before the car is fully depreciated, Publication 463 says you use straight-line depreciation for the remaining estimated useful life.
• Car you lease: if you use the standard mileage rate, “you must use it for the entire lease period.”

When the standard rate is not allowed

Publication 463 lists cases including: using five or more cars at the same time (such as fleet operations); having claimed depreciation other than straight line, MACRS, a section 179 deduction or the special depreciation allowance on the car; or having claimed actual car expenses after 1997 for a car you leased.

What counts as actual car expenses

Publication 463’s list: depreciation, lease payments, registration fees, licenses, insurance, repairs, gas, garage rent, tires, oil, tolls and parking fees. With actual expenses you use the business share of these, so you still need a mileage log to show business miles versus total miles.

Car loan interest

Publication 463 says a self-employed person can deduct the business-use part of car loan interest even when using the standard mileage rate (its example: 60% business use, 60% of the interest on Schedule C).

Which method comes out better depends on your car, costs and miles. That is a question for your tax pro, with your log in hand.

IRS sources

• IRS Publication 463 (2025), chapter 4: Standard Mileage Rate; Actual Car Expenses — https://www.irs.gov/publications/p463
• Publication 463 (PDF) — https://www.irs.gov/pub/irs-pdf/p463.pdf

Educational, not tax advice. Rules depend on your facts. Confirm with a CPA or enrolled agent and with the IRS sources below.