Mileage Reimbursement Calculator

Mileage Reimbursement Calculator: Standard vs. Actual Expense Method

If you use your personal vehicle for business purposes, you are entitled to deduct those driving costs on your tax return. The IRS provides two methods for calculating the deduction: the standard mileage rate and the actual expense method. Choosing the right method can save you hundreds or even thousands of dollars each year. This calculator computes both methods side by side so you can see exactly which one puts more money back in your pocket.

Understanding the Standard Mileage Rate

The standard mileage rate is the simpler of the two methods. The IRS sets a per-mile rate each year that covers the average cost of operating a vehicle, including gas, depreciation, insurance, and maintenance. For 2024, the rate is $0.67 per mile. You simply multiply your total business miles by this rate. The main advantage of the standard mileage method is its simplicity: you only need to track your miles, not every individual expense. However, you must choose this method in the first year the vehicle is available for business use if you want to use it in subsequent years. You also cannot claim depreciation separately, nor can you deduct actual expenses like gas or repairs on top of the standard rate.

Understanding the Actual Expense Method

The actual expense method requires you to track every vehicle-related cost: gas, oil changes, tires, insurance premiums, registration fees, lease payments or depreciation, and repairs. You then multiply the total by the percentage of miles driven for business. For example, if you drove 15,000 miles total and 10,000 were for business, your business use percentage is 66.7%, and you can deduct 66.7% of your total vehicle expenses. This method is often more beneficial for people who drive expensive vehicles with high depreciation values or who have significant maintenance costs. However, it requires meticulous record-keeping throughout the year.

Which Method Should You Choose?

There is no universal answer. The standard mileage rate tends to favor people who drive fuel-efficient, lower-cost vehicles. The actual expense method tends to favor people with newer, more expensive vehicles because depreciation is a significant component. Our calculator lets you enter data for both methods and see which produces the larger deduction. Generally, you should calculate both and use whichever gives you the higher deduction, subject to IRS rules about which method you are eligible to use.

Quarterly Estimated Tax Payments

Self-employed individuals must make quarterly estimated tax payments to the IRS (due April 15, June 15, September 15, and January 15). The mileage deduction reduces your taxable income, which in turn reduces these quarterly payments. Use the estimated tax payment breakdown provided by this calculator to plan your cash flow accordingly. Setting aside a portion each month ensures you are not caught off guard when quarterly deadlines arrive.

Keeping a Mileage Log

Regardless of which method you choose, the IRS requires you to maintain a contemporaneous mileage log. This means recording each business trip at or near the time it occurs, not reconstructing it at year-end. A proper log includes the date, starting location, destination, business purpose, and odometer readings or total miles for each trip. Many smartphone apps can automate this process using GPS tracking.