Quick answer
Self-employed people can deduct the business use of a car in one of two ways:
- Standard mileage rate: in 2026 it’s 72.5¢ per business mile from January 1 to June 30 and 76¢ per mile from July 1 to December 31. The IRS raised it mid-year because gas prices jumped.
- Actual expenses: the business percentage of everything the car costs you: gas, insurance, repairs, tires, registration, lease payments or depreciation.
Mileage is simpler and usually wins for cheap, efficient or older cars driven a lot. Actual expenses usually win for expensive vehicles, high-cost cars to run, or cars used almost only for business.
What counts as business miles
Deductible:
- Driving to meet clients, to job sites or to a temporary work location.
- Trips to the bank, post office or supply store for the business.
- Driving between two work locations.
- Driving from your home office to anywhere for business, if your home is your principal place of business.
Not deductible:
- Commuting: home to a regular office, studio or shop you rent.
- Personal errands, even if you take a work call on the way.
Method 1: standard mileage rate
Multiply your business miles by the rate. For 2026 you need to split miles at July 1:
| Period | Rate |
|---|---|
| Jan 1 to Jun 30, 2026 | 72.5¢ per mile |
| Jul 1 to Dec 31, 2026 | 76¢ per mile |
You can also deduct business parking, tolls and the business share of interest on a car loan. Gas, insurance, repairs and depreciation are already built into the rate, so you can’t add them.
Rules to know:
- To use mileage for a car you own, you must choose it in the first year you use the car for business. After that, you can switch between methods.
- If you lease, choosing mileage means using it for the entire lease.
- You can’t use mileage if you operate five or more vehicles at the same time.
Method 2: actual expenses
Add up the car’s total costs and multiply by your business-use percentage (business miles ÷ total miles).
Costs that count: gas, oil, repairs, tires, insurance, registration and fees, car washes, lease payments, loan interest, garage rent and depreciation. Parking and tolls for business trips are deductible in full.
Depreciation in 2026
With the actual method, you can depreciate the business share of the car’s cost. For passenger cars placed in service in 2026, first-year depreciation is capped at $20,300 with bonus depreciation ($12,300 without). The cap for later years is $19,800 in year 2, $11,900 in year 3 and $7,160 a year after that.
Heavy SUVs, pickups and vans over 6,000 lbs gross vehicle weight aren’t subject to those caps. Section 179 is limited to $32,000 for heavy SUVs in 2026, but 100% bonus depreciation can cover the rest if you use the vehicle more than 50% for business. That’s powerful, but if business use later drops to 50% or less, you must pay some of it back.
Worked example: which method wins?
Alex drives a car that cost $30,000. In 2026 he drives 15,000 miles, 9,000 for business (60%): 4,500 before July and 4,500 after.
Standard mileage: (4,500 × $0.725) + (4,500 × $0.76) = $6,683
Actual expenses:
| Cost | Total | 60% business |
|---|---|---|
| Gas | $2,400 | $1,440 |
| Insurance | $1,800 | $1,080 |
| Repairs and tires | $900 | $540 |
| Registration | $300 | $180 |
| Depreciation (first year, 5-year MACRS, no bonus) | $6,000 | $3,600 |
| Total | $6,840 |
In year one, actual expenses win slightly. But depreciation falls in later years, and if Alex takes the actual method in year one he can never use mileage for this car. Many freelancers take mileage in the first year to keep the flexibility.
Now imagine an older, paid-off car with the same miles: its actual costs might be $3,500 against $6,683 from mileage. Mileage wins easily.
Which method should you choose?
| Your situation | Usually better |
|---|---|
| Lots of miles in an efficient or older car | Standard mileage |
| Expensive new car, SUV or truck | Actual expenses |
| Heavy vehicle (6,000+ lbs) used mostly for business | Actual (bonus depreciation) |
| You hate paperwork | Standard mileage |
| Rideshare or delivery driver | Usually mileage; compare both |
Keep a mileage log
Either way, you need a record of each business trip: date, destination, business purpose and miles. Write it down at the time or use an app that tracks trips by GPS. A year-end estimate won’t hold up in an audit.
The new car loan interest deduction
From 2025 to 2028, individuals can deduct up to $10,000 a year of interest on a loan for a new personal vehicle assembled in the US, with the benefit phasing out above $100,000 of income ($200,000 joint). For self-employed people, the business share of car loan interest already goes on Schedule C. The new deduction can cover the personal share.
Frequently asked questions
How do I handle the mid-year 2026 rate change?
Multiply the business miles you drove January through June by 72.5¢ and those from July through December by 76¢. That’s why your log needs dates.
Can I deduct my car payment?
Not the payment itself. With the actual method you deduct depreciation plus the business share of loan interest. Lease payments are deductible at the business percentage.
Can I switch from actual expenses to standard mileage?
Not for the same car if you used actual expenses with accelerated depreciation. You can switch from mileage to actual expenses.
Where do I claim car expenses?
On Schedule C, line 9, with vehicle details in Part IV (or Form 4562 if you’re claiming depreciation).
This article is general information, not tax advice. Consult a CPA or Enrolled Agent for your situation.
Sources
IRS 2026 standard mileage rate; Journal of Accountancy: IRS raises standard mileage rates for the rest of 2026; Rev. Proc. 2026-15, auto depreciation limits; IRS Publication 463, Travel, Gift and Car Expenses; IRS Publication 946, How to Depreciate Property. Example figures are FreelancerTaxHQ illustrations.