Should I track mileage or use actual vehicle expenses?
The IRS gives you two options for deducting vehicle expenses. The standard mileage rate lets you multiply your business miles by a set rate (67 cents per mile for 2024). The actual expense method lets you deduct the real costs of operating the vehicle, including gas, insurance, repairs, tires, registration, and depreciation. You apply your business-use percentage to the total and deduct that amount.
For most trades and construction businesses, the actual expense method produces a bigger deduction. Trucks and work vans cost more to fuel, maintain, and insure than a sedan. They also depreciate faster and qualify for higher depreciation limits. If you’re driving an F-250 to job sites and hauling equipment, your actual operating costs per mile are well above the standard rate. Add in Section 179 or bonus depreciation in the first year you put the vehicle in service and the gap widens significantly.
The standard mileage rate wins when your vehicle is fuel-efficient, relatively inexpensive, and you drive a lot of business miles. If you’re using a personal car to visit clients and job sites but the vehicle itself is cheap to operate, the per-mile deduction can exceed your actual costs.
Here’s the catch. If you choose actual expenses and claim depreciation in the first year you use the vehicle for business, you cannot switch to the standard mileage rate for that vehicle later. You’re locked in. Going the other direction is allowed though. You can start with the standard mileage rate and switch to actual expenses in a later year. This is why the first-year election matters and is worth thinking through before filing.
Regardless of which method you pick, you need to track your mileage. The actual expense method requires a mileage log to calculate your business-use percentage. The standard mileage method requires it to calculate the deduction itself. No log means no deduction if the IRS asks questions. Use an app like MileIQ or even a simple spreadsheet. Record the date, destination, purpose, and miles for every business trip.
A lot of trades business owners skip mileage tracking because it feels tedious, then lose thousands in deductions at tax time because they can’t document what they drove. That’s money left on the table every single year. Having clean books through bookkeeping for trades businesses is only half the equation. You also need the supporting records that back up your deductions.
If you’re not sure which method saves you more, run the numbers both ways or have someone do it for you. A tax strategy conversation before year end gives you time to make the right choice and start tracking properly instead of guessing in April.
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