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May 29, 2024 - 10 min read

Self-Employed Mileage Deduction Rules

Who is this guide for?

As a self-employed person, you might be eligible for a tax deduction on all your business-related driving. This guide is for you if you’re struggling to navigate self-employed mileage deductions and are one of the following:

  • A small business owner, who reports their income on Schedule C form
  • A freelancer 
  • An independent contractor  

Follow along to find out how much tax money people like you claim on average, what’s considered business mileage, and what are the rules and limitations to claiming your tax deductions from the IRS.

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How much on average do people claim on taxes?

Since there’s no upper limit to how many miles you can claim, tax deductions vary wildly from person to person and depend mostly on the cost of their car, how new it is, and how much they drive.

For mileage, here at Driversnote, we see everything from a few hundred business miles a year to tens of thousands - with the average mileage claim by the standard mileage rate method sitting at around $5,500 for self-employed actively driving for an entire year. Claims tend to go higher for those using the actual expenses method. 

As to the types of drivers that log the most miles, rideshare drivers and couriers are currently among the most prolific drivers in the US.

Trips that count as business mileage

The IRS classifies the following trips as tax-deductible:

  • Driving between two different workplaces 
  • Driving from your home to a temporary workplace (a workplace is generally defined as temporary if you expect to work there for less than one year)
  • Meeting clients and visiting customers
  • Running business-related errands

Trips that are NOT considered business mileage

The types of trips that aren’t considered business (but you still might need a record of, see below for record-keeping):

  • Commuting to and from your home to your permanent workplace
  • Commuting to and from your home to a second workplace

Here's an overview of the trips you can take to and from work:

Diagram of deductible and non-deductible trips when you drive to and from work in the US

Aside from commuting not being deductible, hauling tools or instruments when commuting doesn’t make it a business trip and therefore remains non-deductible (classifies as personal use); the same applies to displaying advertisements on the car. These are both common misconceptions.

Choose between two methods

There are two methods for calculating your 1099 mileage deduction, each with its own set of rules and limitations for deducting business mileage as self-employed.

You must choose between the two, and your choice in the first year of using your car for business often affects your options later. One applies the IRS standard mileage rate and the other lets you deduct your actual expenses related to owning and operating the car.

Standard mileage rate method

The standard mileage rate method uses a set IRS rate you can apply to calculate tax deductions per business mile driven. This method is more straightforward than working out actual expenses, as the rate covers all expenses of owning and running your vehicle for business purposes.

With the 2024 IRS mileage rate, you can claim $0.67 per mile for business-related driving. The IRS mileage rate for 2023 is $0.655 per mile, applicable from January 1, 2023, until December 31, 2023. 

When you opt for the standard mileage rate method, you can deduct an amount per mile driven, along with tolls and parking fees incurred for business purposes. Commuting is generally non-deductible, but read on for details.

Qualifying for the standard mileage rate method

To qualify for the IRS standard mileage rate method, you must own or lease the car(s) you drive for business. Depending whether you do one or the other, there are different criteria for eligibility.

You own the car

If you want to use the standard mileage rate, you must choose it in the first year of the car’s operation in your business. In later years, you can switch to actual expenses (for specifics, check switching below). However, this method is NOT available if you: 

  • Claimed depreciation deductions on the car (other than the straight-line method) 
  • Claimed a section 179 deduction or the car's Special Depreciation Allowance
  • Simultaneously use five or more vehicles for your business (fleet operations) - however, you may switch between the vehicles
  • Are a rural mail carrier, who receives a qualified reimbursement

You lease the car 

When leasing, you must commit to the standard mileage rate method for the entire lease period. This method is NOT applicable if you:

  • Simultaneously use five or more vehicles for your business (fleet operations) - however, you may switch between the vehicles
  • Claimed actual car expenses for a leased car after 1997 

Actual expenses method

As a self-employed person, you can claim deductions for expenses related to owning and operating a vehicle for business purposes. The IRS identifies deductible expenses as: 

  • Depreciation or rental and lease payments
  • Gas and oil
  • Tires
  • Repairs
  • Insurance
  • Registration fees
  • Licenses
  • Parking fees and tolls*
  • Garage rent
  • Trailer rental costs (when hauling tools or instruments)
  • Interest payments on your personal car loan

*If you use the standard mileage rate, you can still deduct parking fees and tolls.

There are three types of depreciation that, if taken, might disqualify you from switching to the standard mileage rate method: The Section 179 Deduction, the Depreciation Deduction, and the Special Depreciation Allowance. We recommend you read up on depreciation in the IRS’s publication or consult your tax professional.

Tips for choosing the right method for you

The actual expenses method generally requires more work on your part, since you have to keep more records. But, it might come with financial benefits based on your circumstances, namely the cost of your car and how expensive it is to run:

  • If your car is worth more than average, you should look into the actual expenses method 
  • If your car is more costly to operate and maintain than average, you should also look into the actual expenses method

The standard mileage rate for business is based on a national average and uses straight-line depreciation. If you’ve bought a new or expensive car - which generally depreciates more during its first years of service - it’s likely that you can deduct more tax via depreciation by using the actual expenses method. Again, don’t choose before calculating your deduction using both methods. We also recommend that you ask your tax professional for help.

Switching between the methods

If you choose to use the actual expenses method in the first year your vehicle is available for use in your business, you won’t be able to apply the standard mileage rate method in any following year while you drive that vehicle. However, if you use the standard mileage rate method in the first year, you can choose between the two methods in the following tax years. Be aware of how you calculate your depreciation, as it might affect eligibility for the standard mileage rate method.

As mentioned earlier, if you want to use the standard mileage rate for a car you lease, you must do so throughout the entire lease period and any lease extensions.

Records you need to keep 

For the standard mileage rate method

You must keep a timely log of your business mileage. The IRS considers a log to be timely if it’s updated on a weekly basis. The log should contain details of each business and personal trip, including:

  • Date
  • Mileage
  • Destination
  • Purpose

You should also log your total mileage for the year; read your odometer at the start and the end of the year. A mileage tracking app could be a handy tool for logging, record-keeping, and reporting of all your business driving more swiftly and accurately.

For the actual expenses method

Just as with the standard mileage rate method, you need to keep a timely log of your mileage (see above).

On top of that, you must maintain documentation and hold onto all receipts associated with owning and running your vehicle to claim actual expenses. Those include depreciation calculations or lease payment receipts, as well as receipts for all deductible expenses (listed above).

How to calculate your 1099 mileage deductions 

The standard mileage rate method

Example: Let's say you drove 2,000 miles for business purposes in 2023. To calculate your mileage tax deduction, multiply the 2023 mileage rate by your business miles. In this example, 2000 miles X $0.655 = $1,310 in mileage deductions.

The actual expenses method 

If you drive your vehicle for business 40% of the time, you can claim 40% of your vehicle’s actual expenses for the year.

Example: Your mileage log shows you have driven 2,000 miles for business purposes and 3,000 personal miles in 2023. You have kept all relevant invoices and receipts. Your expenses in 2023 add up to $5,000.

First, you find the percentage of business-related driving. 2,000 mi out of the total 5,000 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.

See which forms you have to fill out for your 1099 mileage deduction by either of the two methods in our how to claim mileage on taxes guide.

Other circumstances for workplaces and vehicle ownership

If your home is your workplace 

You can deduct business mileage if you have a home office that qualifies as your regular workplace, and drive between your home and another work location in the same trade or business. 

If your home isn’t your regular workplace, driving between home and work is considered a commute, and therefore isn’t deductible.

If you have no regular workplace 

You can deduct mileage for business-related trips between your home and temporary workplaces outside of your metropolitan* area. Trips between your home and temporary workplaces in your metropolitan area are considered commuting miles, and you can’t deduct them.

*A metropolitan area includes the area of your city's limits and the suburbs that are a part of that area.

If you operate a car pool

You can’t deduct the cost of using your car in a non-profit car pool. The payments you receive from passengers are considered a reimbursement for your car expenses. 

In a situation where you run a car pool for profit, you must include the payments you collect from passengers in your income. You can then deduct your car expenses for those trips.

FAQ

Generally, you can’t deduct mileage to and from work. There are a few exceptions that allow you to deduct mileage while driving from your home: If you drive to and from a temporary workplace; if your home is your regular workplace, and you drive to another workplace; and finally, if you drive to a temporary workplace outside your metropolitan area.
There's no upper limit or cap on how many miles you can claim a deduction for, as long as they’re driven for a business purpose.
When using the standard mileage rate, you can claim parking and toll costs for your business-related trips (e.g. when visiting clients or driving from your main office to a temporary workplace). Trips between your home and a regular workplace are considered a commute and are generally non-deductible.
If you’re self-employed, an independent contractor, or a small business owner and drive your own vehicle for business purposes, you qualify for a mileage deduction from the IRS. You can claim a deduction only for the business use portion of your annual mileage.

How to automate your mileage logbook

Manually filling out your logbook can get tedious - see how to automatically track trips for your mileage reimbursement or deductions.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied upon for, legal, tax or accounting advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal, tax or accounting advisor.