The conflict in the Middle East has pushed oil prices back into the headlines. Oil is up substantially year-to-date, and gas prices are rising across the country. If you drive for work, this is both a budgeting problem and a tax question.
Most self-employed drivers default to the IRS standard mileage rate without ever revisiting that decision. When gas is cheap and stable, that's probably fine. When gas prices spike this sharply, it's worth doing the math.
The IRS standard mileage rate for 2026 is 72.5 cents per mile. That rate is set by the IRS periodically, based on a rolling average of vehicle operating costs including fuel, insurance, depreciation, and maintenance.
Here's the issue: the rate is fixed. Gas prices are not.
When gas prices spike sharply, your real fuel costs may outpace what the mileage rate assumes, especially if you drive a less fuel-efficient vehicle. You're paying more at the pump, but your deduction per mile stays the same. The rate isn't wrong, exactly. It's just a blunt instrument designed for average conditions, not a 75% surge.
That gap is the reason to take a hard look at the actual expense method.
Instead of a flat rate per mile, you track what you actually spend on your vehicle and take the actual expenses method, then deduct the portion that corresponds to business use.
Deductible actual expenses include:
If 60% of your driving is for business, you deduct 60% of all those costs. In a high-gas-price environment, that 60% of your fuel bill could be meaningfully larger than what the mileage rate would have given you.
Whether it actually is depends on your specific vehicle, your fuel efficiency, and how much you drive. You need to run the numbers for your situation.
This is the part most people miss: switching to actual expenses does not mean you stop tracking mileage. You still need a mileage log under both methods.
Under the standard mileage rate, mileage is your deduction. Under actual expenses, mileage determines your business-use percentage, which is what gets applied to all your costs.
The IRS requires that log to be contemporaneous, meaning recorded as you drive, not reconstructed later from memory. A compliant log includes:
An after-the-fact estimate will not hold up in an audit under either method. This is non-negotiable regardless of which approach you choose.
You drive a less fuel-efficient vehicle. The mileage rate assumes an average cost per mile. If your vehicle burns more fuel than average, your real costs per mile are higher than the rate gives you credit for.
Your fuel costs are a large share of your vehicle expenses. If gas is the dominant cost and gas is expensive, actual expenses capture that directly.
You have significant business use. The higher your business-use percentage, the more total expenses you can deduct, and the more it matters which method you use.
You want simplicity. Actual expenses require tracking every receipt, every cost, for the entire year. The mileage rate requires one thing: your mileage log.
Your vehicle is newer and fuel-efficient. Depreciation is a large component of the mileage rate calculation. A newer vehicle with lower fuel consumption may do better under the standard rate.
If you use MACRS or bonus depreciation under the actual expense method, you generally cannot switch to the standard mileage rate for that vehicle later. For that reason, the choice in the first year the vehicle is used for business is important.
Now, keep in mind, gas is only a portion of what goes into the mileage rate. A large spike in gas prices may not be the difference in what gets you a larger deduction if we're talking about a couple of extra hundred dollars over the course of a year vs. an extra thousand in depreciation for example. In general, the standard mileage rate works best for simple, lower-cost vehicles. Actual expenses start to win when operating costs are unusually high.
The good news is as long as you qualify, you do not have to decide today which deduction method you will use. You can track your mileage and keep records of your vehicle expenses throughout the year, then compare both methods when it is time to file your taxes. This approach gives you flexibility.
If you log every business mile and keep records of your vehicle costs, you will have everything you need to calculate both deductions:
At the end of the year, you simply compare the two totals and claim your larger deduction.
This is often the smartest approach because vehicle costs change throughout the year. Gas prices fluctuate, maintenance expenses come up, and driving patterns shift. By keeping complete records, you preserve your ability to choose the deduction that benefits you most.
The key requirement is documentation. Everlance automatically tracks your mileage and lets you store expenses in the same place, so you always have the records needed to calculate either deduction method.
If you are not logging your business miles, you are leaving a deduction on the table regardless of which method you use. At 72.5 cents per mile, 400 business miles a month is $3,480 per year in deductions. At a 25% tax rate, that is $870 in taxes you do not owe.
More importantly, you cannot retroactively decide which method to use for a year where you have no records. The IRS does not allow estimated logs after the fact.
Now is the right time to make sure you are capturing everything, and to look seriously at whether the method you have been using still makes sense given where gas prices are.
Everlance automatically tracks your mileage so your log is always accurate, whether you use the standard rate or actual expenses.
Everlance is the top rated mileage & expense tracking app, helping over 4 million independents and small businesses save
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Brad Thibeau is the Head of Growth & Partnerships at Everlance. Brad has worked at Everlance since 2021 with a focus on helping self employed people save time and money on their taxes.
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