Car & Local Travel Expenses — The Rules Every Home-Business Owner Must Know (2025)
Car and local travel deductions are some of the most valuable — and most misunderstood — tax breaks for home-business owners.
The IRS allows deductions for business miles, vehicle expenses, and local travel, but strictly disallows personal and commuting miles.
This guide explains the 2025 rules, standard mileage rates, and how to keep audit-proof records.
1️⃣ What Counts as Business Miles?
Chapter 8 explains that business mileage includes any driving that is ordinary and necessary for your trade.
Commuting to a fixed office is never deductible.
But for home-business owners, many trips qualify because your home is your principal place of business.
- ✔️ Driving to meet clients
- ✔️ Picking up supplies
- ✔️ Banking for business
- ✔️ Post office or shipping center
- ✔️ Local marketing or networking events
Commuting Rule:
If you work from home, most local trips become business mileage because you’re starting from your principal place of business.
Important: Personal trips mixed with business trips must be separated.
Only the business portion is deductible.
2️⃣ Standard Mileage Rate for 2025
The IRS standard mileage rate for 2025 is:
- 💵 67 cents per mile (business)
The standard rate already includes depreciation, gas, maintenance, and insurance —
so you cannot deduct those again separately.
💡 Example
You drove 3,000 business miles in 2025.
Deduction = 3,000 × $0.67 = $2,010
3️⃣ Using the Actual Expense Method
Instead of the standard rate, you may choose to deduct the actual cost of using your vehicle.
Actual expenses include:
- ✔️ Gas & oil
- ✔️ Repairs & maintenance
- ✔️ Tires
- ✔️ Car insurance
- ✔️ Registration fees
- ✔️ Depreciation or lease payments
You must track both total miles and business miles to calculate the percentage.
💡 Example — Actual Method
Total miles: 10,000
Business miles: 4,000 → 40% business use
Annual vehicle costs: $8,000
Deduction: 40% × $8,000 = $3,200
4️⃣ Local Travel Rules
Local travel is deductible when the primary purpose is business.
Examples:
- ✔️ Visiting a job site
- ✔️ Driving to stores for materials
- ✔️ Meeting a client at a café
Mixed-purpose trips:
If you combine a personal errand with business travel,
you may only deduct the business portion.
Tip: Record business stops separately — the IRS looks for clear, purpose-based logs.
5️⃣ Non-Deductible Car Expenses
- ❌ Commuting to a regular office
- ❌ Personal errands
- ❌ Driving to a second job (employee)
- ❌ Fines, parking tickets
- ❌ Car payments beyond business percentage
6️⃣ Real Examples
💡 Example 1 — Home-Based Business Owner
You work from home and drive to meet a client 12 miles away.
✔️ Entire trip is deductible.
💡 Example 2 — Mixed-Purpose
You pick up business supplies, then stop at the grocery store.
✔️ Only the miles to the supply store count.
💡 Example 3 — Personal Errand + Client Meeting
You drive to a personal event, then meet a client nearby.
✔️ Only the client-related miles are deductible.
7️⃣ How to Keep Audit-Proof Mileage Records
✔️ Required IRS Mileage Log Items
• Date of trip
• Starting point
• Destination
• Business purpose
• Miles driven
Apps like MileIQ, Everlance, and QuickBooks Self-Employed automatically track mileage and
are acceptable for IRS audits.
-
QuickBooks Online — Small Business Accounting & Bookkeeping
-
TurboTax Self-Employed — For Freelancers & Home-Business Tax Filing
*As an Amazon Associate, EA Tax Guide may earn from qualifying purchases.
- ① Is Your Home Business Really a Business?
- ② Do You Have a Profit Motive?
- ③ Can You Deduct Your Startup Costs?
- ④ Operating Expenses You Can Deduct
- ⑤ Section 179 & Bonus Depreciation
- ⑥ Home Office Deduction
- ⑦ The QBI 20% Deduction
- ⑧ Car & Local Travel Expenses
- ⑨ Out-of-Town Travel Rules
- ⑩ Inventory Rules
- ⑪ Employees vs. Contractors
- ⑫ Health Insurance & Medical Deductions
- ⑬ Retirement Plan Deductions
- ⑭ Additional Business Deductions
- ⑮ Crypto in Your Business
- ⑯ Recordkeeping & Accounting
- ⑰ Spouses in Business Together
- ⑱ How to Avoid an IRS Audit
핑백: Understanding the 100-Shareholder Limit