The two methods in one sentence each
- Standard mileage rate: business miles × the IRS rate (72.5¢ before July 1, 2026, 76¢ after). Nothing else to add up except parking and tolls.
- Actual expenses: add up everything the car cost you in the year — fuel or charging, insurance, repairs, registration, and depreciation or lease payments — and multiply by your business-use percentage.
Example: a Tesla Model Y used two-thirds for work
Our driver has a Tesla Model Y Long Range (EPA 123 MPGe) and drives 12,000 miles in 2026, of which 8,000 are business — 4,000 in each half of the year.
- Standard rate: 4,000 × 72.5¢ + 4,000 × 76¢ = $5,940
- Charging: 3,370.5 ÷ 123 = 27.4 kWh per 100 miles, at 18.16¢ per kWh that is about 5¢ a mile, or $597 for 12,000 miles
- Other costs: insurance $2,200 + repairs $500 + registration $300 + depreciation $6,000 = $9,000
- Total car cost $9,597 × 66.7% business use = $6,398
Here the actual-expense method gives $458 more. Why, when charging is so cheap? Because new cars lose value fast, and depreciation plus insurance make up most of the cost. With a cheaper or older car the standard rate usually wins.
Same driver, different cars
| Car | Fuel per mile | Actual expenses | Standard rate | Which wins |
|---|---|---|---|---|
| Tesla Model Y Long Range (123 MPGe) | 5.0¢ | $6,398 | $5,940 | Actual +$458 |
| Toyota RAV4 hybrid (43 MPG) | 9.7¢ | $6,773 | $5,940 | Actual +$833 |
| Ford F-150 2.7L (21 MPG) | 19.8¢ | $7,582 | $5,940 | Actual +$1,642 |
| Ford F-150 2.7L, $14,000 depreciation | 19.8¢ | $12,915 | $5,940 | Actual +$6,975 |
Same 12,000 miles and 8,000 business miles; gas $4.153 a gallon. Depreciation for real cars is limited by IRS rules (and heavy SUVs and trucks over 6,000 lb follow different limits), so check the actual figure with your tax preparer.
The rules about switching
- Owned car: if you use the standard rate in the first year the car is used for business, you can switch to actual expenses in a later year. If you start with actual expenses, you can’t switch to the standard rate for that car.
- Leased car: if you choose the standard rate, you must keep it for the whole lease, including renewals.
- Five or more cars used at the same time (a fleet): actual expenses only.
Records you need
Both methods need a mileage log showing business and total miles. The actual method also needs receipts for every cost. If record-keeping feels like a chore, the standard rate is the friendlier choice — and in most cases it gives a similar or better result.
FAQ
Is the standard mileage rate or actual expenses better for an electric car?
It depends on what the car costs to own. Charging is cheap (about 5¢ a mile for a Tesla Model Y at 18.16¢/kWh), but depreciation and insurance can be high. In this example actual expenses give $6,398, which is $458 more than the $5,940 standard deduction.
Can I switch from the standard mileage rate to actual expenses?
For a car you own, yes — if you used the standard rate in the first year the car was used for business. For a leased car, choosing the standard rate locks it in for the entire lease.
Can I use the mileage rate for a car with 8,000 business miles out of 12,000?
Yes. The standard rate applies only to the 8,000 business miles: 4,000 × 72.5¢ + 4,000 × 76¢ = $5,940 in 2026. The 4,000 personal miles are not deductible.
Sources (checked 5 November 2026): IRS news release IR-2025-128 and Notice 2026-10 (irs.gov/newsroom/irs-sets-2026-business-standard-mileage-rate-at-725-cents-per-mile-up-25-cents); IRS Announcement 2026-11 (mid-year increase effective July 1, 2026), confirmed by Journal of Accountancy and Grant Thornton (July 2026); EPA combined MPG/MPGe for model year 2026 (fueleconomy.gov data, via mpgbuddy.com); EIA weekly retail gasoline price $4.153 for November 2, 2026 (released November 3); EIA Electric Power Monthly table 5.3, U.S. residential 18.16¢/kWh for August 2026.