Definition
The tax deduction self-employed people take for business driving. You can multiply business miles by the standard mileage rate the IRS publishes each year, or deduct the business share of actual car costs such as gas, insurance, repairs, and depreciation. Commuting between home and a regular workplace does not count, and the deduction requires a log of dates, miles, and business purpose.
Why it matters
For anyone who drives for work, mileage is often the largest deduction on Schedule C, and it cuts both income tax and self-employment tax. Without a contemporaneous log the deduction is the first thing an audit removes.
Example
A mobile dog groomer drives 12,000 business miles out of 20,000 total. Under the actual-expense method, 60% of her $9,000 of car costs, or $5,400, is deductible; under the standard-rate method she multiplies the 12,000 miles by that year's IRS rate and takes whichever result is larger. At a combined income and self-employment tax rate of about 30%, a $5,400 deduction saves roughly $1,600.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.