How Vehicle and Mileage Deductions Really Work for Small Business Owners
When you use your car for business purposes, that mileage can add up, and so can the deductions. But knowing what you can actually write off (and how to do it correctly) can be confusing if you’re not used to navigating IRS rules.
This week, we’re diving into vehicle and mileage deductions: how they work, what’s allowed, what’s not, and how to keep things clean and simple in your books.
Illustration showing a business mileage checklist with items like office, home office, commuting, and personal use. Includes a car, calculator, map pin icon, and an odometer reading 5000 miles.
What Counts as Business Mileage?
Let’s start with what qualifies. Business mileage includes any driving that’s ordinary and necessary for your business. That can include:
Driving to a client meeting
Picking up supplies or materials
Traveling between job sites
Going to networking events or conferences
Driving to the post office to ship products or paperwork
What doesn’t count? Commuting from your home to your regular office, even if you're self-employed. That’s considered a personal expense and isn’t deductible.
What About a Home Office?
If your home qualifies as your principal place of business (like a dedicated space you use regularly and exclusively for work), then any trips from your home to other work locations are deductible. That includes driving to a client site, vendor, coworking space, or business errand.
But if your home office doesn’t meet IRS requirements, say you work at the kitchen table or only occasionally use the space for business, those same trips may be treated as commuting and would not be deductible.
Having a properly documented home office doesn’t just help with the home office deduction; it can also open the door to more mileage write-offs throughout the year.
Understanding Commuting vs. Personal Use
Not all miles behind the wheel are created equal when it comes to deductions. Let’s clear up two important categories:
Commuting miles are trips between your home and your regular place of work. Even if you're self-employed, driving from your house to a permanent office or job site is considered commuting. These miles are not deductible.
Personal use miles are any trips that have nothing to do with your business, like picking up groceries, taking your kids to school, or going on vacation. These are never deductible, even if you're driving a vehicle that’s primarily used for your business.
The IRS only allows you to deduct mileage that is directly related to operating your business. That’s why keeping clear, consistent records is so important.
Two Ways to Deduct Vehicle Expenses
The IRS gives you two options for deducting your vehicle use:
1. Standard Mileage Rate
This is the easiest method. You track your business miles and multiply them by the IRS rate for the year.
For 2025, the standard mileage rate is 70 cents per mile.
(Check irs.gov each year for updates.)
So, if you drive 1,000 business miles in a year:
1,000 miles × $0.70 = $700 deduction
You can also deduct parking fees and tolls related to business use, even when using the standard mileage method.
Important: You must choose the standard mileage method in the first year you use a car for business if you want the option to switch to actual expenses later.
2. Actual Expenses Method
This method lets you deduct a percentage of all actual car-related expenses based on your business use. That includes:
Gas
Oil changes and maintenance
Repairs
Insurance
Registration fees
Depreciation (for owned vehicles)
Lease payments (for leased vehicles)
Example: If 70% of your vehicle use is for business, you can deduct 70% of those costs.
This method takes more effort—but if you have a newer vehicle with high operating costs, it can yield a bigger deduction.
Choosing the Right Method for You
Here’s a quick breakdown:
If you're not sure which method is best, a tax professional (like me!) can run the numbers both ways and help you choose the one that saves you the most.
How to Track Business Mileage Properly
Whether you use the standard mileage rate or actual expenses, you need a detailed mileage log. The IRS wants to see:
The date of the trip
The starting point and destination
The purpose of the trip
The miles driven
You can track this in a spreadsheet, a notebook you keep in the car, or use an app. I always tell my clients: whatever system you choose, the best one is the one you’ll actually use.
What About Using Your Personal Car?
If you’re using your personal vehicle for business, you can still claim deductions, but only for the portion of use that’s business-related. You’ll need to keep track of total miles driven during the year and business miles so you can calculate the percentage.
Pro tip: Take a photo of your odometer on January 1st and again on December 31st so you have an annual total.
Vehicle Deductions for LLCs and S-Corps
If your business is structured as an LLC or S-Corp and the business owns the vehicle, the process can get a little more complex. The expenses are typically paid directly from the business account, and the deductions stay on the business’s books.
If you use a personal vehicle and are reimbursed by the business, the reimbursement must be properly documented using an accountable plan. Otherwise, it may be considered taxable income to you personally.
Final Thoughts
Business vehicle deductions can be incredibly valuable, but only if you understand the rules and track your mileage correctly. The IRS isn’t looking for perfection, but they do expect consistency and documentation.
If you’ve been guessing at mileage or lumping everything together, don’t worry. This is a great time to tighten things up and start fresh. At Pilot Management Group, I help business owners determine the best deduction strategy, streamline their mileage logs, and establish systems that make tax time less stressful. Whether you drive 500 miles or 5,000 a year, every bit counts.