Standard Mileage vs Actual Expenses for TLC Vehicles

In short: you can deduct your TLC car either with the standard mileage rate (a set amount per business mile: 72.5¢ for Jan–Jun 2026 and 76¢ from July 1, 2026; rates as of 2026-10-12) or with your actual expenses (gas, repairs, insurance, registration, depreciation or lease payments, times your business-use share). The IRS suggests that if you qualify for both, you figure it both ways (IRS Topic 510). But the choice has strings: the first-year rule for owned cars, the whole-lease rule for leased cars, and no standard rate for fleets of five or more.

This guide helps you decide, using the IRS rules and TLC's own study of what it costs to drive a for-hire car in NYC. It is general information, not tax advice.

The rules for choosing and switching

From IRS Publication 463 (2025) and Topic 510:

• Cars for hire are allowed. Pub 463: "You can elect to use the standard mileage rate if you used a car for hire (such as a taxi)" unless one of the exclusions applies.
• Owned car — choose it in year one. To use the standard rate for a car you own, you must choose it in the first year the car is available for use in your business. In later years you can pick either method.
• Switching later to actual expenses (before the car is fully depreciated) means using straight-line depreciation over the car's remaining estimated useful life.
• Started with actual expenses? If you claimed MACRS, Section 179, special (bonus) depreciation, or any non-straight-line depreciation on the car, you can't use the standard rate for it afterwards.
• The choice is made by the due date of your return (including extensions), and Pub 463 says you can't revoke it for that year.
• Five or more cars at once: you can't use the standard rate for any of them. Alternating cars (using them at different times) is not "at the same time."

Leased or rented TLC cars

For a leased car, if you choose the standard mileage rate you must use it for the entire lease period, including renewals. And if you have claimed actual expenses for a car you lease, you can't use the standard rate for it (IRS Topic 510). With actual expenses, lease payments are part of your cost, and Pub 463 has special rules that can limit the amount you deduct for leased cars.

If you rent a TLC-plated car week to week, how these rules apply to a short-term rental that is renewed every week is a detail to settle with a preparer before you pick a method — the lock-in can last as long as you keep renting the same car. More: can I deduct my TLC car rental?

What "actual expenses" include

Pub 463 lists: depreciation, lease payments, registration fees, licenses, insurance, repairs, gas, garage rent, tires, oil, tolls and parking fees. If you use the car for personal driving too, you can deduct only the business share, based on miles. Pub 463's example: 12,000 business miles out of 20,000 total means 60% of the costs.

With the standard rate, you can't add depreciation, lease payments, repairs, gas, oil, insurance or registration for that car. You can add business tolls and parking, and the business part of car loan interest if you are self-employed (Pub 463).

How TLC's cost study compares with the IRS rate

In December 2024 TLC published a study of what it costs a full-time Uber/Lyft driver to run a car in NYC, used to set the minimum pay standard. It assumed 32,500 miles a year and found these costs per mile (TLC Driver Expense Report):

Read this carefully. TLC built these numbers to set pay, not taxes. Two big differences:

1. Car payments are not a tax deduction. TLC's owner figures include loan payments. For taxes, an owner deducts depreciation (with IRS limits) and the business part of interest, not the loan payments themselves.
2. Your miles and costs are your own. TLC's figures are averages for one model driver. Your rent, insurance and miles decide your answer.

What the study does show: in TLC's model, renting cost more per mile than owning, by 31% for gas cars and 24% for EVs. For a renter, rent is a real cost each week, which is why actual expenses can be worth figuring.

A worked comparison (fictional)

Sam rents a TLC-plated hybrid for 2026. He drives 32,500 miles in the year; 30,000 are business miles, split evenly: 15,000 before July 1 and 15,000 after. His made-up costs: rent of $500 a week ($26,000 for the year) and $4,000 of gas.

• Standard rate: 15,000 × $0.725 + 15,000 × $0.76 = $22,275.
• Actual expenses: ($26,000 + $4,000) × 30,000 ÷ 32,500 business share (92.3%) = about $27,692.

In this example actual expenses give about $5,400 more deduction, and that also lowers self-employment tax. A driver with a paid-off car and low insurance could get the opposite answer. Both methods add tolls and parking on top. The full list of what else you can write off is in the TLC driver deductions list; if you are still choosing between renting and buying, see buying or leasing a TLC vehicle.

Figure it both ways

Enter your 2026 business miles (split at July 1), total miles, and your real costs. The estimator shows both deductions and the rough self-employment-tax difference. Rate details: IRS mileage rate 2026 and IRS mileage rate history. Tolls and parking: can I deduct tolls and parking?

Records either way

• Standard rate: a dated mileage log (business, commuting, personal) and odometer readings. Pub 463 says you can't deduct amounts you approximate or estimate.
• Actual expenses: every receipt, the purchase or lease contract, insurance bills, and the same mileage log (to work out the business share).
• Both: keep records at least 3 years from filing, and car-use records for each year of the depreciation period (Pub 463).

Taxi drivers: see can I use standard mileage for a taxi?