What is the difference between Standard and Actual Cost mileage methods?

The IRS states that the Standard method is when you keep track of the miles you drive for business and apply the IRS defined rate to find out how much you can deduct. 

The Actual Cost method is when you keep track of all the expenses in running your vehicle. That includes the business portion of gas, repairs, insurance, lease payments, depreciation, etc.  You still need to track mileage to determine what portion of your actual costs is related to business vs personal.

Most freelancers use the Standard method because it’s easier and results in a bigger expense write-off, but in some cases using this method is not allowed (e.g. if you have fleet of 5+ cars).

For more information see the IRS web site for Self-Employed individuals.

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