How to Claim Mileage on Taxes: Cents-per-mile vs Actual Expense Method

Cents-per-mile (CPM): The one-and-done mileage calculation

If you’re averse to spreadsheets, math, or spreadsheet math, cents-per-mile is for you.

The cents-per-mile method lets you deduct a fixed rate per mile driven for business purposes. Track your work mileage throughout the year, then multiply it by the standard mileage rate (set by the IRS), and you’re done.

business mileage * standard mileage rate = deduction

The standard rate gets updated every year to reflect various changing costs of driving, maintenance, and vehicle ownership. For 2024, the rate is 67 cents per mile for business. 

That means if you drove 10,000 miles for your business in 2024, you would calculate your mileage deduction like this:

10,000 * 0.67 = $6,700

In this case, you’d be able to deduct $6,700 for business-related vehicle expenses.

TIP:  You can also use cents-per-mile to calculate other types of mileage deductions, including mileage driven for medical or moving purposes, and charitable mileage. 

• Medical and moving mileage rate: 21 cents per mile (2024)
• Charitable mileage rate: 14 cents per mile (2024)

Cents-per-mile pros and cons 

Is the cents-per-mile method right for me?

Cents-per-mile is great if you value simplicity and don’t want to keep every single receipt and invoice related to using your car for work. If driving is not a large part of your business, but you want to get back some money, cents-per-mile is also a good option because it doesn’t require much effort. 

You do, however, need to keep thorough records of your mileage, including total miles driven, to and from locations, and trip purpose for each drive. Thankfully, mileage apps can track all those details automatically. For example, MileIQ tracks miles in the background, all you need to do is swipe to classify a drive and then tap to create a report of all your drives — routes, total mileage, and even your approximate mileage deductions for each drive will show up instantly.

Actual expense method: For those who like the details

If you have a to-do list for your to-do-list and generally don’t mind managing admin complexities, the actual expense method could be for you.

The actual expense method lets you deduct the true (“actual”) costs of operating a vehicle for business purposes, including:

• fuel
• maintenance
• insurance
• repairs
• depreciation

It also requires you to track mileage to determine the business use percentage (business mileage divided by total yearly mileage). 

Here’s the formula you would use for the actual expenses method:

vehicle-related expenses * business use percentage = deduction

For example, your total vehicle costs in a year added up to $15,000, including everything from repairs and tires to fuel and depreciation. Then, after calculating mileage, you’ve determined that 65% of your miles were business-related. The calculation goes like this:

$15,000 * 0.65 = $9,750

In this case, you’d be able to deduct $9,750 of your taxable income. 

While the math itself may not look too difficult, getting to these numbers can be challenging. In order to determine the costs of using your vehicle you’d need to keep track of every expense during the year, no matter how trivial. And if, like many  self-employed people, you also use your car for personal trips, calculating exactly how much you use your car for work can be tricky.

Actual expense method pros and cons

Is the actual expense method right for me?

The actual expense method is highly accurate, but it may be more trouble than it’s worth if you struggle with organizing paperwork and don’t want to hire a bookkeeper. For very small businesses and solopreneurs, the actual expense method can also be incredibly time consuming — tracking down every receipt for each gas station stop can quickly become an annoyance. 

‍TIP: If you choose the actual expense method the first year you claim mileage deductions, you’ll have to continue using this method for that vehicle every year.

“Should I use cents-per-mile or actual expense method?”

Here’s how the two mileage deductions methods compare.

‍

It’s ultimately up to you which method you want to use. For some self-employed people, getting the maximum mileage deduction with the actual expense method may be worth the extra recordkeeping and paperwork — and potentially hiring a financial advisor. Others may just want to get back money on miles they drive for work, in which case cents-per-mile is the easiest.

What else do I need to know about mileage deductions

What qualifies as business mileage?

Drives directly related to running your business qualify for tax deductions. That includes: 

• client meetings
• job site visits
• work errands (supply runs, etc)

One notable exception is your daily commute between home and regular place of work (like your office, workshop, or studio), which the IRS doesn’t consider as a business expense. 

That is, unless you go to work at a “temporary workplace” which the IRS defines as any place where you expect to work for less than a year. For instance, if you run a carpentry shop at home but have a temporary workplace at your client's house, you may include each trip in your total business mileage

What mileage records should you keep?

It depends on which mileage calculations method you use, but to fill out Schedule C of your tax return, you’ll need:

• Total mileage for every vehicle you used for business
• Your commute mileage (which will need to be deducted from business mileage)
• Total business mileage for every vehicle

In addition, you’ll also need to keep details like dates, locations, and business reasons for any drives you claim on your taxes. MileIQ tracks all these details automatically and can attribute different mileage to specific vehicles.

Every time you complete a drive, a card with start and end locations, route map, vehicle used, and total mileage appears, along with any potential savings. You can also add custom purposes (“meeting” “client visit”) to each drive, as well as parking and toll fees. 

What other business travel expenses can be deducted?

Obviously, driving isn’t the only expense you’ll incur when traveling for work. Airfare, transit tickets, accommodations, and a portion of business meals are all considered deductible by the IRS. As long as the expense is ordinary and necessary for your business, chances are it’s deductible. 

Out of all business expenses, mileage is the easiest to forget. What can be more annoying than updating a log every time you get behind the wheel? MileIQ tracks drives automatically, so you never miss out on mileage deductions.