Auto Expenses For Sole Proprietors

Methods for Deducting Auto Expenses

There are two basic ways to deduct business auto expenses:  the actual expense method or the standard mileage rate.

  • Actual Expenses Method
  • Standard Mileage Per Diem Method

Actual Expenses Method

In order to deduct auto expenses using the actual expense method:

  • Only the business percentage is deductible
  • Must maintain a mileage log to calculate the business percentage

Types of expenses that can be deducted under the actual expense method:

  • Gas and oil
  • Repairs, maintenance, tires
  • Insurance and licenses
  • Depreciation
  • Car loan interest
  • Car lease payments
  • Parking fees and tolls

Standard Mileage per Diem Method

The deduction for auto usage using the mileage per diem method is calculated as follows:

         Multiply the business miles driven times IRS-approved rate. 

         Add in parking fees & tolls

Standard mileage guidelines:

  • The standard mileage rate method is not available if you use five or more cars at the same time

Mileage Logs

Under both of the above methods, you must keep a mileage log.  A mileage log must contain:

  • Record of the date,
  •  Mileage,
  • Business location,
  • Names and relationships of clients,
  • The business purpose for each trip. 

How to calculate business mileage

Business mileage starts from the primary office.  If it is a home office, the business mileage begins at the home.  If the primary office is a business office, the business mileage begins at the business office. 

It is recommended that you keep a contemporaneous diary for both methods. 


The rules governing vehicle deductions are full of exceptions and limitations.  To be certain you use the method that’s right for you, please discuss with us.  We can review your situation and your options with you.

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