Building Your Business Business Taxes Standard Mileage Rate vs. Actual Expenses: Which Is Better? How to calculate both so you can decide which is better for your business taxes By Erin Eberlin Erin Eberlin Erin Eberlin is a real estate and landlord expert, covering rental management, tenant acquisition, and property investment. She has more than 16 years of experience in real estate. learn about our editorial policies Updated on September 13, 2022 Fact checked by Hilarey Gould Fact checked by Hilarey Gould Twitter Website Hilarey Gould has spent 10+ years in the digital media space, where she's developed a passion for helping people understand economics, saving, investing, credit card perks, mortgage rates, and more. Hilarey is the editorial director for The Balance and has held full-time and freelance roles at a variety of financial media companies including realtor.com, Bankrate, and SmartAsset. She has a master's in journalism from the University of Missouri, and a bachelor's in journalism and professional writing from The College of New Jersey (TCNJ). learn about our editorial policies In This Article View All In This Article What Is the Standard Mileage Rate? How To Calculate the Standard Mileage Rate Standard Mileage Rate Deduction What Is the Actual Expenses Method? What Are the Actual Expenses You Can Deduct? Actual Expenses Deduction How To Calculate the Actual Expenses Deduction Which Is Better? Frequently Asked Questions (FAQs) Photo: svetikd / Getty Images If you have a vehicle that you use for your business, you may be able to deduct certain expenses on your taxes. You must meet certain requirements in order to take these write-offs and there are two methods to consider: the standard mileage rate or the actual vehicle expenses. Here's how both work so you can decide which is right for your business tax situation. Key Takeaways The standard mileage rate is a flat rate per mile that helps you easily calculate your tax deduction for business-related car travel.The actual expenses method is when you total up all of your car's expenses, figure out how many miles were for business, and then calculate your tax deduction.There are rules around using one vs. the other, so consider both before choosing which one gives you the larger tax deduction for your business during tax season. What Is the Standard Mileage Rate? The first option for deducting driving expenses is to use the standard mileage rate. In this deduction, you will calculate the total miles driven and multiply it by the standard mileage rate. The standard mileage rate changes per year. For the 2022 tax year, there were two standard mileage rates because of the high price of gas: January to June: 58.5 cents per mileJuly to December: 62.5 cents per mile How To Calculate the Standard Mileage Rate Let's say you drove 50 miles to and from your small business every month in 2022. If we use the standard deduction, the calculation looks like this: 50 miles x 58.5 cents x 6 months = 175.5 50 miles x 62.5 cents x 6 months = 187.5 175.5 + 187.5 = 363 You can deduct $363 from your business taxes for your business travel. This is based on the standard mileage rate. Who Can Take Deductions Using the Standard Mileage Rate? You can make deductions using the standard mileage rate if: You have used the standard mileage rate since you first leased or bought the car. You have leased a car and intend to use the standard mileage rate deduction for the entirety of the lease You use four vehicles or fewer in your daily business operations You cannot use the standard mileage rate if: You have used the actual expense tax deduction and claimed the accelerated depreciation deduction in previous years You have claimed a Section 179 deduction on the vehicle If you use the standard mileage rate you cannot deduct: Lease payments Depreciation Actual auto expenses You can still deduct business-related expenses like: Parking fees and tollsInterest if you have a loan on the carApplicable registration fees and any taxes Note You can switch to using the actual expense method in later years even if you first began using the standard mileage rate. However, you cannot use accelerated depreciation. You will have to use the straight-line method of depreciation. What Is the Actual Expenses Method? The other option available for deducting driving-related expenses is the actual expenses method. You can use this method if you are not able to use the standard mileage rate or if you simply choose not to. The actual expenses method requires you to total up your car's expenses like gas, registration fees, parking fees, tolls, lease payments, and more (see below). You must use the actual expenses method if: You have a fleet of vehicles (more than four) used simultaneously for your business activitiesYou lease a car and do not plan on using the standard mileage rate for the entirety of the leaseYou used the actual expense calculation when your vehicle was first used for business purposes What Are the Actual Expenses You Can Deduct? When you use the actual expenses method to calculate your tax deduction for business travel on a car, you can add up and deduct the following expenses: Interest on a vehicle loan Vehicle depreciation (leased vehicles cannot be depreciated) Registration fees and tax Parking fees and tolls Garage rent Lease payments Insurance Gasoline Oil Maintenance Repairs Insurance Tires License plates Registration fees Note For lease payments, an income inclusion amount must be subtracted from the amount you can deduct if the vehicle’s value is above a certain amount. This amount changes yearly so be sure to check with the IRS or your accountant. How Much Can You Deduct With the Actual Expenses Method? You can only deduct the portion of the expenses that was used for business. So if 60% of your driving was for business, you can deduct 60% of the expenses. How To Calculate the Actual Expenses Deduction Let's say you drove 10,000 miles in 2022, but only 6,000 were for business. That's 60% of the miles driven for the year. Your actual car expenses for all 10,000 miles in 2022 were $3,000. The calculation would look like this: 60% x $3,000 = $1800 You could deduct $1,800 from your business taxes. Standard Mileage Rate vs. Actual Expenses, Which Is Better? The best method depends on a number of factors. It depends on the vehicle you drive and the operating costs of the vehicle. If your vehicle gets great gas mileage, then taking the standard mileage deduction will likely be more beneficial for you. If your vehicle has very high operating costs and low gas mileage, then taking the actual expense deduction may produce better savings for you. Frequently Asked Questions (FAQs) How do you calculate the actual vehicle expenses for business taxes? First add up all of your cars expenses for the year. Then, calculate how many miles you used the car for business-related travel. Divide that into the total miles driven for the year. Multiply the portion for business travel times the expenses for the year to get the actual expenses you can deduct on your business taxes. What does the standard mileage rate cover? The standard mileage rate applies to miles driven for business. It's a flat rate per mile, such as 62.5 cents per mile. It's an easy way to calculate a tax deduction for your business-related car travel. The standard mileage rate also applies to car travel related to charity, and medical or moving purposes. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. IRS. "IRS Increases Mileage Rate for Remainder of 2022." IRS. "Publication 463, Travel, Gift, and Car Expenses." IRS. "Standard Mileage Rate."