Self-employed Mileage Deductions Rules
As an independent contractor, a self-employed individual or a small business owner, you can deduct expenses for business-related miles you've driven. If you use a car solely for business, you can deduct all the expenses related to operating the car. However, if you use the car for both personal and business travel, you can only deduct the costs associated with the business use from the total.
Methods for calculating your self-employed mileage deductions
There are two methods of calculating your 1099 mileage deduction. Each way has its own rules for deducting business mileage as self-employed.
The standard mileage rate method
The standard mileage rate method uses a set by the IRS rate you can use to claim tax deductions per business mile driven. This is considered to be simpler than working out actual costs, as the rate covers all expenses of owning and running your vehicle for business purposes. You are also able to deduct parking costs and tolls separately from the standard mileage rate so long as they are business-related. You must qualify to be able to use the standard mileage rate, though.
The IRS has announced the 2024 standard mileage rate for business. You can claim $0.67 per mile for your 2024 business-related driving.
The mileage rate for 2023 is $0.655 per mile for business. This rate is applicable from January 1, 2023, until December 31, 2023.
Qualifying for the standard mileage rate method
To qualify for the IRS standard mileage rate method, you must either own or lease the car(s) that you use for business. Depending on whether you do one or the other, there are different criteria to keep in mind.
You own the car
- You must use the standard mileage rate in the first year of the car's operation in your business. In later years, you can switch back and forth between the two methods, but there's no choice for the first year.
- You must not have claimed depreciation deductions on the car except by the straight-line method.
- You also must not have claimed a section 179 deduction or the car's special depreciation allowance. You can read more about depreciation in the links provided as well as in this continually updated resource from the IRS.
- You must not use five cars or more simultaneously for your business, such as a fleet operation. However, you can switch between vehicles.
You lease the car
- You must use the standard mileage rate in the first year of the car's operation in your business.
- You must also continue using the standard mileage rate method for the entire lease period, including any leasing renewals.
- As with owned vehicles, you must not simultaneously use five cars or more for your business (fleet operations). However, switching between them is fine.
Records you need to keep for the standard mileage rate method
You must keep a timely log of your business mileage. The IRS considers logs to be timely if they are made not more than a week after the trips happened. The log should contain details of each business and personal trip, including the date, mileage, destination and purpose of the trip. You should also log your total mileage for the year.
How to calculate your 1099 mileage deductions
Let's say you drove 2000 miles for business purposes in 2023. To calculate your mileage tax deduction, you must multiply that year's mileage rate by your business miles. In this example, 2000 miles X $0.655 = $1310 in mileage deductions.
The actual expenses method
You can claim deductions for the actual expenses related to owning and operating your vehicle for business purposes, such as depreciation, gas, repairs, insurance, etc. The IRS has an updated list of what business owners and self-employed can deduct under the actual expenses method. The expenses you can deduct are:
- Depreciation or lease payments
- Gas and oil
- Registration fees
- Parking fees, tolls
- Garage rent
Records you need to keep for the actual expenses method
You will need to record all business and personal mileage in order to work out the business use of the vehicle. Your mileage log should contain the following information for each trip - the date, mileage traveled, destination and purpose.
Furthermore, you must keep all receipts associated with owning and running your vehicle in order to claim actual expenses. Those are depreciation calculations or lease payment receipts, and receipts for all gas and oil, tires, repairs, insurance, registration fees and licenses. Remember to also keep receipts for all business-related tolls and parking fees, and garage rent.
How to calculate your 1099 mileage deductions
If you drive your vehicle for business purposes 40% of the time, you will be able to claim 40% of your vehicle’s actual expenses for the year.
Your mileage log shows you have driven 2,000 miles for business purposes and 3,000 personal miles in 2023. You have kept all invoices and receipts related to your car. Your expenses add up to $5,000 during the year.
First, you find the percentage of driving that was for business. 2,000 mi out of the total 5000 mi is 40%. This means you can deduct 40% of all car-related costs you had throughout the year. 40% of $5,000 is $2,000 in mileage deductions.
Find out which forms you need to fill out for your 1099 mileage deduction by the standard mileage rate or actual expenses methods in our five steps to claiming mileage on taxes guide.
Tips for choosing the right method for you
You might qualify for both methods. Therefore it's worth knowing what goes along with each: As a rule, the actual expenses method requires keeping track of all car expenses throughout the year, along with tracking your business and personal mileage, which can be time-consuming. The standard mileage rate method only requires you to keep track of your business and personal mileage.
First tip: The actual expenses method requires more administrative work, so make sure it's worth it before you start.
Second tip: Since the standard rate is exactly the same regardless of vehicle, you should tend to consider the actual expenses method if you drive a vehicle that's costly to maintain and/or has a high fuel consumption.
Third tip: If in the first year your vehicle is available for use in your business you use the actual expenses method, you will not be able to use the standard mileage rate method in any following year while you drive this vehicle. However, if you use the standard mileage rate method in the first year, you can then switch between the two methods each tax year as you see fit. And, as we mentioned earlier, if you want to use the standard mileage rate for a car you lease, you must use this method for the entire lease period and any lease extensions.
Which trips count as business mileage for self-employed?
There's no upper limit to how many miles you can claim a deduction for as long as you drive them for business purposes.
Miles that are considered business
- Driving between two different places of work
- Driving from your home to a temporary place of work
- Meeting clients and going on customer visits
- Running business-related errands
Miles that are not considered business
- Commuting from your home to your permanent place of work
- Carrying tools does not make a commute a business trip
- Displaying advertising on a car does not make driving it a business trip
For cases in which you have no place of work, where your home qualifies as your place of work, carpooling, and more, see the IRS's own publication on transportation.
How to automate your mileage logbook
IRS Mileage Guide
- How To Claim Your Mileage On Taxes In 5 steps
- Calculate Your Reimbursement
- For Self-Employed
- California Mileage Reimbursement
- IRS Medical And Charitable Mileage
- For Employers
- For Employees
- Mileage Log Requirements
- How The IRS Mileage Rate Is Set
- Current Mileage Rates
- Is Reimbursement Taxed?
- IRS Mileage Rate 2022
- IRS Mileage Rate 2021
- Mileage Rates 2020