As a small business owner, how can I deduct car expenses related to my business when I also use the car personally?
For deducting car expenses, the IRS gives us two options:
- You can track how much mileage you do for your business and take the standard mileage rate deduction that the IRS sets each year. In either a spreadsheet or app, keep a running log of all the business-related trips you took in your car. This could include trips like traveling to client meetings or work sites, or running errands for your business. Then, multiply this figure by the standard mileage rate set by the IRS. For 2026, this is 72.5 cents per mile. Each year, the IRS issues a new rate. After calculating this amount, either transfer funds from your business to your personal account or leave the funds in your books as an amount you personally contributed to your business. The latter method is most common. If you use this method, you can't individually deduct any other car expenses like gas, repairs or lease payments. The IRS considers the mileage rate to include all expenses related to operating and maintaining the vehicle.
- The second option still involves tracking mileage, but also requires tracking all of the real costs associated with operating the car (gas, insurance, repairs, etc.). You then expense the percentage of real costs tied to business use. For example, if your trips are 60% for work and 40% for personal reasons in a specific period, then you can deduct 60% of the real expenses for the car to your business. So you still need a log of mileage for business to compare to personal mileage and also a log of all vehicle expenses.
What should a mileage log look like?
A mileage log doesn't need to be complicated. Black Gallina has created a simple spreadsheet you can use if you'd like.
In the spreadsheet, you will input the starting and ending addresses for the trip and the total mileage. The mileage reimbursement for the trip will then be automatically calculated. Monthly you can reimburse yourself personally from your business account for the amount you calculated in the spreadsheet. Alternatively, you can create a journal entry to account for the amount you have contributed as the owner to the business through the use of the car.
When a new year starts, make sure to check the IRS website to see if the standard mileage rate has changed.
