If you drive for your business, you can deduct the cost in one of two ways: the standard mileage rate, or your actual car expenses for the business share of the year. For 2026, the IRS changed the standard rate mid-year. It’s 72.5 cents per mile for business driving from January 1 to June 30, and 76 cents per mile from July 1 to December 31, per the IRS mileage rate table. The increase came from higher fuel prices, according to Announcement 2026-11. For most freelancers who drive a typical car, the standard rate is both simpler and larger.
The 2026 standard mileage rates
| Business miles driven | Rate | IRS source |
|---|---|---|
| January 1 – June 30, 2026 | 72.5¢ per mile | Notice 2026-10 (IR-2025-128) |
| July 1 – December 31, 2026 | 76¢ per mile | Announcement 2026-11 (IR-2026-29) |
The announcement applies the new rate to business transportation expenses paid or incurred on or after July 1, 2026. Anything before that stays at the original rate. Mid-year changes are rare but not new: the IRS did the same in 2022 and 2011.
On top of the per-mile amount, you can deduct business parking fees and tolls, per Publication 463. Self-employed drivers can also deduct the business share of car loan interest on Schedule C. What you can’t add under the standard rate are gas, insurance, repairs, registration or depreciation, because the rate already covers them.
The actual expense method
Instead of the rate, you can deduct the business percentage of what the car really cost you. Publication 463 lists depreciation (or lease payments), gas, oil, tires, repairs, insurance, registration, licenses, garage rent, parking and tolls. The business percentage comes from your mileage: 12,000 business miles out of 20,000 total is 60%.
Depreciation is usually the biggest and most complicated piece. It’s subject to annual limits for passenger cars, and it’s covered in Publication 463 and Publication 946.
Rules for choosing between them
From Publication 463:
- Choose the standard rate in the car’s first year if you ever want to use it. For a car you own, you must use the standard mileage rate in the first year the car is available for business. In later years you can pick either method.
- Leased car: if you use the standard rate, you must keep using it for the whole lease.
- You can’t use the standard rate if you operate five or more cars at the same time, or if you’ve claimed accelerated (MACRS) depreciation, a section 179 deduction or bonus depreciation on the car.
- Switching to actual expenses later is allowed, but you then depreciate the car on a straight-line basis over its remaining useful life. Part of the standard rate already counts as depreciation (35 cents per mile for 2026, per Notice 2026-10), and it reduces the car’s basis.
Worked example: a freelance photographer
You drive 20,000 miles in 2026, 12,000 of them for business (60%): 6,000 business miles before July 1 and 6,000 after. You also pay $300 in parking and tolls on business trips. Under the actual method, your car costs for the year are gas $2,400, insurance $1,500, repairs and maintenance $800, tires $400 and registration $200. Depreciation comes to $3,000, an assumed figure for this example, which you’d work out under the Publication 946 rules.
- 1$4,350
Business miles, Jan 1 – Jun 30
6,000 × $0.725
- 2$4,560
Business miles, Jul 1 – Dec 31
6,000 × $0.76
- 3$8,910
Mileage deduction
$4,350 + $4,560
- 4$300
Business parking and tolls
- 5$9,210
Total car deduction (standard)
Illustrative figures. Rates from the IRS standard mileage rate table for 2026.
- Standard mileage rateLarger deduction$9,210
$8,910 for 12,000 miles + $300 parking and tolls
- Actual expenses$5,280
60% × $8,300 ($2,400 gas + $1,500 insurance + $800 repairs + $400 tires + $200 registration + $3,000 depreciation) + $300 parking and tolls
Illustrative figures. Depreciation is an assumed amount for this example; real depreciation depends on the car's cost, when it was placed in service and the IRS annual limits.
For this car, the standard rate wins by $3,930. That’s the typical pattern for a reasonably priced car driven a lot. Actual expenses tend to win with an expensive vehicle, high depreciation, high running costs or relatively few business miles. The Publication 463 tip applies: if you qualify for both, figure it both ways. Just remember the first-year rule. If you don’t pick the standard rate in the car’s first business year, you lose it for that car.
What counts as business driving
- Deductible: trips between clients, to meet a customer, to a supplier, to a temporary work site. If your home office qualifies as your principal place of business, trips from home to another work location in the same business count too.
- Not deductible: commuting between home and your regular place of work, however far it is, and even if you take business calls on the way. Parking at your regular workplace is a commuting cost as well.
Keep a log
Publication 463 says you can’t deduct amounts you approximate or estimate. Its recordkeeping table (Table 5-1) lists what to keep for car expenses: the mileage for each business use, the date and business purpose of each trip, and your total miles for the year. A log kept at or near the time of each trip is the standard way to do it. For 2026, the dates matter more than usual: they’re how you split your miles between the 72.5¢ and 76¢ rates.
Bottom line
For 2026, multiply business miles driven through June 30 by 72.5¢ and miles from July 1 by 76¢, then add business parking and tolls. For most freelancers that beats actual expenses and needs far less paperwork. Car expenses go on Schedule C, so they lower your net profit, and with it both your self-employment tax and the income your QBI deduction is based on.