The mileage deduction for a side business

Updated November 2026 · 2026 tax year · 8 minute read

If your side business involves a car, driving to clients, picking up supplies, delivering orders, or running business errands, you can deduct that driving. For 2026 the IRS standard business mileage rate is 72.5 cents per mile for miles driven January 1 through June 30, and 76 cents per mile for miles driven from July 1 through December 31, after a mid-year increase. This guide explains which miles count, how to choose between the two ways of calculating the deduction, and how to keep a log that holds up.

The 2026 rate

The IRS sets the standard mileage rate each year, and it can change during the year. For 2026 the rate is 72.5 cents per mile for business miles driven from January 1 through June 30, and 76 cents per mile for business miles driven from July 1 through December 31. Each mile is deducted at the rate for the date it was driven, which is one more reason your log needs dates. If you drive 2,000 business miles in the first half of the year and 1,000 in the second half, the deduction is (2,000 × $0.725) + (1,000 × $0.76) = $1,450 + $760 = $2,210. At a 22% federal rate plus self-employment tax, that deduction saves roughly $765 in federal tax, and it can reduce state tax too. The rate is meant to cover the full cost of operating the vehicle, including fuel, maintenance, insurance and depreciation, so under the standard method you do not deduct those costs separately. You can still deduct parking fees and tolls for business trips, as they are not part of the rate.

Which trips count

A business mile is one driven for a business purpose, not one you would have driven anyway. These generally count:

Driving from one work location to another, such as from one client to the next.
Driving to meet a client, deliver goods, or pick up inventory or supplies.
Trips to the bank, post office or office-supply store for the business.
Driving to a temporary work location away from your regular area of work.
For gig drivers, miles driven with a passenger or an order, and miles driven to the pickup. See our gig economy guide.

Commuting between your home and your regular workplace does not count. This is the rule most side-business owners need to remember. If you drive from home to your day job and then to a client, only the leg from the day job to the client may qualify, and even that depends on the facts. If you have a qualifying home office as your principal place of business, trips from home to a client generally do qualify, which is one more reason to read the home office guide.

Mixed trips need care. If you drive to the hardware store for a personal errand and also pick up business supplies, you deduct the business portion of the trip, not the whole thing. A reasonable approach is to count only the extra miles the business purpose added, and to note it.

Standard mileage versus actual expenses

You have two methods for deducting car costs.

Standard mileage rate. Multiply business miles by the rate. It is simple and requires the least record-keeping, and it is the usual choice for side businesses.
Actual expenses. Add up what the car cost to run, such as gas, oil, repairs, tires, insurance, registration, depreciation and lease payments, and deduct the business-use percentage. If you drove 4,000 miles in total and 1,000 were for business, your business-use percentage is 25%. This method needs receipts for everything.

The standard method usually wins for a car with low running costs, or one that is already fairly old. The actual-expense method can win with expensive vehicles, heavy business use, or high operating costs. There is an important rule about switching: if you use the standard mileage rate in the first year you use a car for business, you can switch to actual expenses in a later year. If you start with actual expenses and use certain accelerated depreciation, you usually cannot switch to the standard rate for that car later. Many people therefore start with the standard rate in year one to keep their options open.

You cannot use the standard rate if you operate five or more vehicles at the same time, such as a fleet. That rarely applies to a side business.

What the log needs to show

The IRS requires adequate records for vehicle deductions. A mileage log kept at or near the time of each trip is much stronger than a reconstruction months later. For each trip, record:

The date.
Where you went, meaning the destination or the starting and ending points.
The business purpose, such as "client meeting with ABC" or "pick up inventory."
The miles driven.

Also record the odometer reading at the start and end of the year, and note the total miles for the year. This allows you to show what share of the total was business. You can keep the log in a notebook, a spreadsheet, or a mileage-tracking app. Whichever you choose, the details matter more than the format. A log entry like "driving, 12 miles" with no purpose is weak.

Worked example

Sam works a day job and runs a small lawn-care business on weekends. In 2026 Sam drives 1,100 business miles between customers' homes, the supply store and prospects' yards from January through June, and 1,300 from July through December. Sam's commute to the day job is not counted. The deduction is (1,100 × $0.725) + (1,300 × $0.76) = $797.50 + $988.00 = $1,785.50. Sam also paid $85 in parking and tolls for client visits, which are deducted separately, bringing the vehicle-related deductions to $1,870.50. Sam keeps a spreadsheet with the date, route, purpose and miles of each trip, and photos of the odometer on January 1 and December 31.

Other vehicle rules to know

Lease or own. Both work with either method, though the details of depreciation and lease inclusion amounts can differ under the actual-expense method.
Heavy vehicles. Larger vehicles used for business sometimes qualify for larger first-year deductions, but special rules apply. Consult a professional before buying a vehicle largely for tax reasons.
Electric vehicles. The standard mileage rate applies to electric and hybrid vehicles as well.
Rideshare and delivery platforms. Many platforms show trip miles, but they usually do not show every mile you drove while waiting, and the miles to reach the first pickup may be left out. Keep your own log and compare.

Common mistakes

Deducting commuting miles.
Claiming a round-number total with no log.
Deducting gas on top of the standard rate. The rate already includes it.
Counting every mile on a car that is also your family car.
Forgetting parking and tolls, which are in addition to the rate.

Mileage is one of the biggest deductions for many side businesses, so a simple habit pays off. Our list of side-income deductions covers the rest, and the recordkeeping guide explains how long to keep your log.

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Sources

This guide is general information, not tax advice. Tax rules change and individual circumstances differ. Confirm the details for your situation with the IRS or a licensed tax professional.