How to calculate business mileage

A key part of business travel is calculating your expenses. Transportation, meals, accommodations—all of these are expenses that either your company can reimburse you for, or you can deduct from your taxes.

And If you’re driving during the trip, whether it’s your personal car, a company car, or a business rental car, part of keeping up with your expenses will be knowing how to calculate business mileage. Business mileage is typically tax deductible, as well, with some conditions. Because the rules can be complex, understanding the basics can help you stay compliant and make informed decisions.

• What counts as business mileage?
• Guide how to calculate business mileage
• The importance of tracking business mileage
• Final considerations for business mileage and travel planning

Standard mileage rate

This is the more straightforward method of the two. Each year, the IRS sets a flat rate per mile that can be deducted. These rates are different each year, so you'll need to keep an eye on the standard mileage rate page on the IRS website for updates. Historically, the standard mileage rate for businesses goes up by 2 or 3 cents each year.

For this method, you calculate your deduction by multiplying your total business miles by the flat rate for the applicable tax year. Be sure that you only include business miles in this calculation—not personal or commuting miles.

In 2025, for example, the flat rate is $0.70 per mile. If you drove 500 business miles in 2025, you would multiply 500 by 0.7, equalling a tax deduction of $350.

It's also important to note here that in order to use the standard mileage rate, you must own the car or be leasing the vehicle for business purposes.

Benefits of the standard mileage rate

• If you opt for this method during the first year that you own the car, you can switch between this method and the actual expense method in the following years.
• If you drive a lot of business miles, this method will also result in a bigger tax deduction.

Drawbacks of the standard mileage rate

• Diligent recordkeeping is required to accurately determine business mileage.
• If you don't drive a lot of business miles, you'll get a smaller deduction than you would with the actual expense method.

Actual expenses method

Your other option is to deduct your actual expenses for the vehicle overall. This method is a little more involved, as you'll need to keep records for the overall operating cost of the vehicle throughout the year. You will need to keep track of money spent, the payment method, the dates, and descriptions of each of the following things:

• Gas
• Maintenance and repairs
• Insurance
• Registration fees
• Depreciation according to the total number of business miles (if you own the car)
• Licenses
• Oil
• Lease payments (if applicable)

Note: business-related parking fees and tolls should not be included in this total, as they are separately deductible.

With this method, you will still need to keep track of your business miles. If the car wasn't used solely for business, you will need to calculate what percentage of its use was for business by dividing your total business miles by your total annual miles. Once you have this percentage, multiply this by your total annual car expenses.

For example, let's say your expenses were a total of $5200 based on the following:

• Maintenance/repairs: $1200
• Gas: $3000
• Insurance: $1000

And then let's say you drove 100,000 miles total during the year, but only 60,000 of those were business miles. This means your business use percentage is 60%. You will now multiply $5200 by 0.6, resulting in a tax deduction of $3120.

Benefits of the actual expense method

• If you drive a normal amount of business miles, you may get a bigger tax deduction than you would with the standard mileage rate.
• If you own the car, you can also deduct depreciation.

Drawbacks of the actual expense method

• This method requires more detailed recordkeeping.
• Calculations are more complex compared to the standard mileage rate.