Standard Mileage vs. Actual Expenses: Which Is Better in 2025?
When choosing between the standard mileage vs actual expenses 2025 deduction methods, it’s important to know how each affects your taxes, records, and refund. Understanding both options helps you select the approach that offers the greatest savings and the simplest recordkeeping.
The Standard Mileage Rate
For 2025, the IRS allows a deduction of 70 cents per business mile driven, according to IRS Notice 2025-5. This rate covers the average costs of fuel, maintenance, insurance, and depreciation.
To use this method, you simply record your business miles and multiply by the IRS rate. You don’t need to keep receipts for every fill-up or oil change, but you must maintain a mileage log showing date, destination, purpose, and total miles.
Pros:
- Simple to calculate
- Less recordkeeping
- Usually best for newer or fuel-efficient cars
Cons:
- You can’t claim separate expenses for repairs, insurance, or depreciation
- You must choose this method the first year you use a vehicle for business if you want to keep the option open in future years
For the current reimbursement rates, check “IRS 2025 Mileage Rates and Vehicle Limits.”
The Actual Expense Method
This approach allows you to deduct the real costs of owning and operating your car for business. That includes:
- Gas and oil
- Maintenance and repairs
- Tires, insurance, and registration
- Depreciation or lease payments
If 70% of your total mileage is for business, you can deduct 70% of your car-related expenses.
Pros:
- Can yield a larger deduction for expensive or high-mileage vehicles
- Reflects your actual operating costs
Cons:
- Requires detailed receipts and records
- More complex calculations
If you work independently, read “Tax Deductions for Self-Employed Drivers 2025” to discover additional write-offs.
Which Method Works Best in 2025?
For many self-employed individuals, the standard mileage rate remains the easiest and often most efficient way to claim deductions—especially for those who drive moderate distances or use multiple vehicles. However, if you own a large or older vehicle with higher running costs, the actual expense method might result in a bigger write-off.
To see how depreciation limits fit into the bigger picture, visit “IRS Business Expense Rules 2025.”
Bottom Line
Both methods are legitimate under IRS rules, and you can switch between them under certain conditions. Review your mileage and receipts early in the year to decide which approach makes sense for your 2025 return.
For details on the current mileage rates and limits, see our main article: IRS 2025 Mileage Rates and Vehicle Limits.
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