How do I calculate my business-use percentage for a vehicle I also drive personally?

When you use the same vehicle for both business and personal driving, only the business portion of your expenses is deductible. The IRS requires you to track actual miles driven for each purpose throughout the year, then divide business miles by total miles to arrive of a business-use percentage. That percentage is applied to either your actual vehicle expenses or, if you use the standard mileage rate, only the business miles count directly. Accurate, contemporaneous records are the foundation of any defensible allocation.

Why allocation matters

A vehicle used for both work and personal errands is called a mixed-use vehicle. The tax rules do not allow a full deduction simply because a car is sometimes used for business. Instead, you must allocate costs between the two uses and deduct only the business share. Getting this calculation right protects your deduction and keeps you prepared if the IRS asks questions.

Key terms to know

Business-use percentage -- the share of total annual miles driven for qualifying business purposes.
Annual mileage -- total miles put on the vehicle during the tax year, regardless of purpose.
Allocation -- the process of splitting a shared cost between deductible and non-deductible use.
Proration -- applying a percentage to a dollar amount to find the deductible portion.
Mixed-use vehicle -- any vehicle used for both business and personal driving in the same year.

Step 1 -- Track miles by category all year

Keep a running log that records, for each trip: the date, destination, business purpose, and miles driven. At year-end, total your miles in each category:

Business miles (client visits, job sites, off-site meetings, etc.)
Commuting miles (home to your regular workplace -- not deductible)
Personal miles (errands, vacations, personal appointments)

The sum of all three categories should equal the odometer difference between January 1 and December 31.

Step 2 -- Calculate your business-use percentage

The formula is straightforward:

Business-use percentage = Business miles / Total miles x 100

Example A -- Simple split

Suppose your odometer shows 18,000 miles driven during the year. Your log shows:

Business miles: 9,000
Commuting miles: 4,500
Personal miles: 4,500

Business-use percentage: 9,000 / 18,000 = 50%

Example B -- Higher business use

Same vehicle, different year. Total miles: 22,000.

Business miles: 17,600
Commuting miles: 2,200
Personal miles: 2,200

Business-use percentage: 17,600 / 22,000 = 80%

Note: Because this exceeds 50%, the vehicle clears the listed property threshold, which affects depreciation options available under the tax code.

Step 3 -- Apply the percentage to your expenses

Once you have your business-use percentage, apply it to your total deductible vehicle costs for the year.

If you use the actual expense method

Add up all vehicle costs -- gas, insurance, repairs, registration, depreciation -- then multiply by the business-use percentage.

Example (50% business use): Total actual expenses = $8,400. Deductible amount = $8,400 x 50% = $4,200.

If you use the standard mileage rate

Multiply only your business miles by the IRS rate for the year. Personal and commuting miles are simply excluded -- no separate percentage step is needed.

Example: 9,000 business miles x the applicable IRS rate = your deduction. Check the IRS website or your tax software for the current rate, as it can change annually.

Step 4 -- Document and retain your records

The IRS can ask you to substantiate vehicle deductions for up to three years after filing (longer in some circumstances). Best practices include:

Recording each trip at or near the time it occurs -- memory-based logs reconstructed at year-end are harder to defend.
Noting the odometer reading at the start and end of the year.
Keeping receipts for actual expenses if you use that method.
Using a dedicated mileage log app, spreadsheet, or paper logbook.

Does commuting ever count as a business mile?

Generally, no. The IRS treats the drive between your home and your regular place of business as a personal commute, even if you think about work the whole way. There are narrow exceptions -- for example, if your home qualifies as your principal place of business, trips from that home office to client locations may be deductible. A tax professional can help you evaluate whether an exception applies to your situation.

What if I own more than one vehicle used for business?

You calculate a separate business-use percentage for each vehicle. The IRS requires per-vehicle substantiation, so your mileage log should clearly identify which car or truck each trip involved. The percentages will likely differ across vehicles depending on how each one is used.

Does the business-use percentage affect depreciation?

Yes. If you claim depreciation on a vehicle (rather than the standard mileage rate), the depreciable amount is limited to the business-use percentage. Additionally, if business use falls to 50% or below in any year, the tax code imposes stricter depreciation limits and may require you to recapture previously claimed accelerated depreciation. This is one reason accurate annual tracking matters beyond just the current year's deduction.

Can I switch between the standard mileage rate and actual expenses?

There are restrictions. In general, if you want to use the standard mileage rate, you must choose it in the first year the vehicle is placed in service for business. If you start with actual expenses and claim certain depreciation methods, you may be locked into that method for the life of the vehicle. The rules are detailed, so review IRS Publication 463 or consult a tax professional before deciding which method to use.