Every sourcing run, post office trip, and estate-sale drive is a business mile, and the IRS gives you two completely different ways to turn that driving into a deduction. Most resellers default to the standard mileage rate because it's simpler — log the miles, multiply by the rate, done. What that default skips over is that the other method, actual expenses, can be worth dramatically more in the first year you own a vehicle, for one specific reason: bonus depreciation. It also comes with a rule almost nobody reads before choosing — pick actual expenses first and claim accelerated depreciation, and you're locked into that method for that vehicle for as long as you own it.
The two methods, in short
Standard mileage is a flat cents-per-mile rate the IRS sets each year, meant to cover gas, insurance, repairs, and depreciation all at once. You multiply your business miles by the rate and that's the deduction — no receipts for oil changes, no depreciation schedule.
Actual expenses means totaling every real cost of running the vehicle for the year — fuel, insurance, repairs, registration, lease payments or depreciation — then multiplying that total by your business-use percentage (business miles divided by total miles driven). It requires more record-keeping, but it captures the vehicle's own depreciation directly instead of folding a generic estimate of it into a per-mile rate.
2026's rate, and the part that's easy to miss
The standard mileage rate itself changed mid-year in 2026: 72.5 cents a mile from January 1 through June 30, then 76 cents a mile from July 1 on, per IRS Notice 2026-10 and the mid-year Announcement 2026-11 that followed it. What that notice also sets, and what most sellers never look at, is the depreciation component baked into that rate — 35 cents of every mile under the standard rate is treated by the IRS as depreciation, whether or not that reflects what your specific vehicle is actually losing in value. That component didn't move with the mid-year rate change; it's 35 cents a mile for all of 2026. It matters later, because it's the piece the IRS uses to reduce your car's basis even under the "simple" method — and it's the number that makes actual expenses look very different for a vehicle you just bought.
Where actual expenses pulls ahead: bonus depreciation
The One Big Beautiful Bill Act restored 100% bonus depreciation permanently for qualifying property placed in service after January 19, 2025 — meaning a vehicle you buy and start using for sourcing in 2026 can be depreciated in full in its first year, not spread over five, subject to one cap: Section 280F's luxury-auto depreciation limit. For a passenger vehicle placed in service in 2026 with bonus depreciation claimed, that first-year cap is $20,300 per Rev. Proc. 2026-15 — a dollar ceiling before your business-use percentage is applied, not a percentage of the vehicle's price.
That cap is why the comparison isn't close for a newer or mid-priced vehicle in year one. Standard mileage caps out at whatever your rate times your miles comes to, full stop. Actual expenses lets you pull tens of thousands of dollars of depreciation forward into the year you bought the car — as long as you're willing to accept what comes with claiming it.
A worked example
Say you buy a $28,000 SUV in January 2026 and use it for sourcing runs, post office trips, and personal errands. You log 10,000 business miles out of 14,000 total for the year — a 71% business-use rate — split evenly across the two mileage-rate periods.
Standard mileage: - 5,000 miles Jan–Jun at 72.5¢ = $3,625 - 5,000 miles Jul–Dec at 76¢ = $3,800 - Total deduction: $7,425
Actual expenses, same vehicle and mileage: - Gas, insurance, repairs, and registration for the year: $4,900 - At 71% business use: $4,900 × 0.71 = $3,479 - Bonus depreciation, capped at $20,300 for 2026 and prorated by business-use percentage: $20,300 × 0.71 = $14,413 - Total deduction: $17,892
Same vehicle, same driving, and actual expenses comes out more than double the standard mileage deduction — entirely because of that first-year depreciation claim. That gap only exists in the year you place the vehicle in service, or in a year you make a large repair; in later years, with no new depreciation left to claim, standard mileage often catches back up or wins outright, especially once the IRS raises the per-mile rate again.
The rule that makes this a one-way door
Here's the part that turns this from a yearly choice into a one-time decision: if you use actual expenses in the first year you place a vehicle in service and claim accelerated depreciation — bonus depreciation or MACRS — you can never switch that vehicle to the standard mileage rate again, for as long as you own it. The IRS treats that as an irrevocable election for that specific car.
Go the other direction and you keep flexibility: choose standard mileage in year one, and you're allowed to switch to actual expenses in a later year. The catch is that once you switch, you can't retroactively claim the depreciation you would have gotten under the accelerated schedule — you depreciate what's left of the vehicle's basis using straight-line depreciation over its remaining recovery period instead, a much slower write-off than the bonus depreciation you'd have gotten by choosing actual expenses from day one.
There's a second cost to the big first-year depreciation claim worth knowing before you take it: if your business use later drops below 50%, or you sell the vehicle for more than its depreciated basis, some or all of that depreciation gets recaptured as ordinary income. A vehicle that's mostly a sourcing car today but becomes mostly personal-use next year can turn a past deduction into next year's tax bill.
What to actually do
- Decide in the vehicle's first year of business use, deliberately.
- This isn't a choice you get to revisit painlessly later — running both
- calculations before you file that first return is the only point where
- you have full flexibility.
- Keep a mileage log regardless of which method you pick. Actual
- expenses needs it to calculate your business-use percentage; standard
- mileage needs it to substantiate the deduction if you're ever asked. There's
- no version of either method that skips logging trips.
- Weigh the vehicle's cost and age. A newer, pricier vehicle has more
- room under the $20,300 first-year cap to make actual expenses worth the
- extra bookkeeping. An older, cheaper vehicle with little value left to
- depreciate usually isn't worth the switch in cost.
- **Think about how long you'll keep using it for the business, and how
- steady that use will be.** Locking into actual expenses on a vehicle
- you'll sell or repurpose for mostly personal use in a year or two invites
- a recapture bill that can erase the deduction you already banked.
- Don't assume last year's math still applies. The mileage rate can
- change mid-year, as it did in 2026, and depreciation caps are
- inflation-adjusted annually — rerun the comparison each time you place a
- new vehicle in service rather than reusing an old answer.
PalmFlow's Expenses ledger has a Mileage category built in alongside the rest of what doesn't attach to a single item, so a sourcing trip logged once flows straight into your net profit instead of sitting in a notes app until tax season. It tracks the miles either method needs — it doesn't run the depreciation math or file anything, so the actual-expenses-vs-standard-mileage comparison itself is still a conversation with a CPA. Expenses is part of the paid plans; the free plan still covers per-item cost basis and fees on 50 items, no card.
Disclaimer: this is general information, not tax advice. Depreciation caps, bonus depreciation rules, and the mileage rate itself are all subject to change, and the choice between these two methods has consequences that compound over years — confirm your specific situation with a CPA before you file your first return on a new vehicle.