Maximizing Your Business Mileage: A Guide to Deducting Vehicle Expenses in 2025

As a solo entrepreneur, your vehicle is an essential part of running your business—whether you're meeting clients, picking up supplies, or attending networking events. The good news? You may be able to deduct some of your vehicle expenses on your taxes! However, you must meet specific IRS requirements to qualify.

There are two methods available for deducting vehicle expenses:

• The Standard Mileage Rate

• The Actual Expense Method

Both can reduce your taxable income, but the right choice depends on your driving habits and financial situation. Let’s break them down so you can make the best decision.

Method 1: The Standard Mileage Rate

This method simplifies the process by allowing you to deduct a fixed amount per business mile driven instead of tracking every individual expense.

The IRS standard mileage rate for 2025 is 70 cents per mile.

Example: If you drive 5,000 miles for business in 2025:
5,000 miles × 70¢ = $3,500 tax deduction

Who Qualifies for the Standard Mileage Rate?
To use this method, you must:

• Use the standard mileage method from the first year you used the car for business

• Use this method for the full lease term if the car is leased

• Not operate more than four vehicles at the same time

Who Cannot Use This Method?

• If you’ve used the actual expense method in a prior year and claimed accelerated depreciation

• If you’ve claimed a Section 179 deduction on the vehicle

 What’s NOT Included in the Standard Mileage Deduction?
The following expenses cannot be deducted separately if using this method:

• Lease payments

• Depreciation

• Actual expenses like gas, insurance, and maintenance

Pro Tip: This method is best for self-employed individuals who drive frequently but don’t have high vehicle expenses.

Method 2: The Actual Expense Method

With this method, instead of using a per-mile rate, you can deduct actual costs associated with running your vehicle for business.

Eligible Deductible Expenses Include:

• Gasoline & oil changes

• Repairs & maintenance

• Insurance

• Lease payments

• Vehicle depreciation

• Registration fees & taxes

• Loan interest (if financing the vehicle)

• Parking fees & tolls

If 70% of your total mileage is for business, you can deduct 70% of all eligible vehicle expenses.

Example: If your total vehicle expenses for the year were $6,000 and you used your car for business 70% of the time:
$6,000 × 70% = $4,200 tax deduction

Pro Tip: This method is ideal for entrepreneurs with high vehicle costs or those who drive fewer business miles but spend more on maintenance and financing.

Key Takeaways for Solo Entrepreneurs

• Keep detailed mileage records with a log or tracking app

• Know your business-use percentage and apply it to expenses

• Choose the right deduction method based on mileage and vehicle costs

• Work with a tax professional to ensure compliance and maximize deductions

Need help choosing the best vehicle deduction method? Let Tax Charm simplify the process and maximize your tax savings.