For rideshare and delivery drivers, the car is the business, and vehicle costs are usually the biggest deduction on the return. The IRS gives you two ways to claim them: a flat per-mile rate, or a share of what the car actually cost to run.
Most drivers default to the standard mileage rate without comparing the two, and for many of them that is the right call. But not for everyone, and the rules about switching between methods mean an early decision can stick with you for the life of the vehicle.
How the standard mileage rate works
The IRS publishes a business mileage rate each year. Multiply your business miles by that rate and you have your deduction. The rate is designed to cover gas, maintenance, repairs, insurance, registration, and depreciation, so you cannot deduct those separately on top of it. Business parking fees and tolls are the exception: those can be deducted in addition to the mileage rate.
How the actual expense method works
Under the actual expense method, you total everything the car cost you for the year and deduct the business-use percentage. If 70% of your miles were for business, you deduct 70% of the total.
- Gas, oil changes, tires, and repairs
- Insurance, registration, and license fees
- Lease payments, or depreciation if you own the car
- Interest on a car loan (for self-employed people)
Which method usually comes out ahead
The standard rate tends to win for drivers who rack up a lot of miles in an efficient, inexpensive, or older car, because the per-mile rate stays the same even when the real cost per mile is low. Actual expenses can win for drivers with an expensive vehicle, a newer car with large depreciation, high insurance costs, or relatively few miles. The only way to know is to run both with your own numbers.
The first-year rule that limits switching
If you own your car and want the option to use the standard rate, you generally have to choose it in the first year the car is used for business. After that, you can switch to actual expenses in a later year, but moving from actual expenses back to the standard rate is restricted. For a leased car, choosing the standard rate generally means using it for the entire lease period. If you are unsure, starting with the standard rate keeps more doors open.
Records matter under both methods
Either way, you need a mileage log showing the date, purpose, and miles of each business trip, plus your total miles for the year to work out the business-use percentage. Commuting miles, such as driving from home to a regular workplace, are not deductible. For the actual expense method you also need receipts for every cost. A mileage deduction calculator can estimate the standard-rate deduction for your miles so you can compare it against your actual costs.
This article is for general education only and is not tax or legal advice. Tax rules vary by jurisdiction, change over time, and depend on your specific situation. Talk to a qualified tax professional before making filing or payment decisions.