Standard Mileage Rate vs. Actual Expenses: Which Should You Use?

If you use your car for work — whether that’s rideshare driving, deliveries, or a small business — the IRS gives you two different ways to deduct your vehicle costs. Picking the wrong one can genuinely cost you money, and once you choose a method for a vehicle, switching later isn’t always straightforward. Here’s how to figure out which one actually saves you more.

Key Takeaways

• The standard mileage rate is low-effort and tends to favor newer, efficient vehicles
• The actual expense method takes more record-keeping but can produce a bigger deduction for older, costlier-to-run vehicles
• Your choice in year one matters — switching later isn’t always allowed
• Tracking both methods side by side is the only way to know for sure which saves you more

The Two IRS-Approved Methods, Side by Side

Standard Mileage Rate

This method is simple: multiply your business miles driven by the IRS’s standard mileage rate for the year, and that’s your deduction. You don’t need to track individual expenses like gas or repairs — just accurate mileage. It’s the lower-effort option, and it tends to favor drivers with newer, more fuel-efficient, lower-maintenance vehicles.

Actual Expense Method

This method requires tracking every real cost tied to operating your vehicle — fuel, maintenance, repairs, insurance, registration, and depreciation — then deducting the business-use percentage of the total. It takes more record-keeping, but it can produce a larger deduction if you’re driving an older vehicle with higher maintenance costs, or one that isn’t especially fuel-efficient.

How to Decide Which Is Better for You

The honest answer is: it depends on your specific vehicle and driving pattern, and the only way to know for sure is to calculate both. As a general pattern, though:

• Newer, efficient vehicles with low maintenance costs tend to come out ahead with the standard mileage rate
• Older vehicles with higher repair and maintenance costs often do better with actual expenses

Your cost per mile is a useful starting point for this comparison either way.

A Real Example

Say you drove 15,000 business miles this year:

1. At a standard mileage rate around $0.67/mile, that’s roughly a $10,000 deduction
2. Your actual vehicle expenses for the year — fuel, maintenance, insurance, depreciation — added up to $9,200 at 80% business use, giving you a deduction closer to $7,360
3. In this case, the standard mileage rate comes out ahead

But swap in an older vehicle with a major repair bill that year, and the actual expense method could easily surpass the mileage rate instead.

You Can’t Switch as Freely as You Think

Here’s the part most drivers don’t realize until it’s too late: if you use the standard mileage rate in the first year you use a vehicle for business, you generally retain the flexibility to switch to actual expenses later. But if you start with actual expenses (and use certain depreciation methods), you may be locked out of the standard mileage rate for that vehicle going forward. This is genuinely worth getting right from year one, not something to decide casually.

This is general information, not tax advice — a tax professional can confirm which method makes sense for your specific situation.

Track Both Automatically

Rather than guessing which method wins, TORQ Track Driver tracks your mileage and your actual expenses side by side, all year, so you can see both numbers clearly instead of reconstructing them in April. It’s the same underlying data used to compare earnings against costs across gig platforms — when it’s time to file, you’ll already know which method actually saves you more, no scrambling required.

Want a more detailed answer to a specific tax situation? Check our full FAQ or see TORQ Track’s plans — we’re happy to point you toward more resources.

Frequently Asked Questions

Can I switch methods every year?

Generally, once you've used actual expenses (with certain depreciation elections) on a vehicle, you may be locked into that method for the life of that vehicle. Starting with standard mileage typically preserves more flexibility. Confirm your specific situation with a tax professional.

Does the standard mileage rate change every year?

Yes, the IRS adjusts it annually based on the cost of operating a vehicle. Always confirm the current year's rate before calculating your deduction.

Which method is better for rideshare and delivery drivers?

There's no universal answer — it depends on your vehicle's age and maintenance costs. See our guide on tracking rideshare and delivery earnings vs. expenses for how to weigh the two methods against your real numbers.

Do I need to track actual expenses even if I plan to use the standard mileage rate?

It's a good idea in year one, since it gives you the option to compare both methods and see which one actually saves you more before you commit.

Can TORQ Track calculate both deduction methods for me?

Yes — TORQ Track Driver tracks mileage and actual expenses simultaneously, so you can compare both totals rather than calculating them separately at tax time.