This article is general guidance, not tax advice. Confirm specifics with your CPA.
The two methods, briefly
The IRS lets you choose between two methods for deducting vehicle expenses:
Standard mileage rate
Multiply business miles by the IRS standard rate for that year. The rate is set annually by the IRS and changes most years. Simpler to track — you only need the miles.
Actual expense method
Track all vehicle expenses (gas, insurance, maintenance, registration, depreciation or lease payments) and deduct the business-use percentage based on total miles. More documentation required.
Most agents use standard mileage because the math usually comes out similar and the tracking is easier. Once you've used standard mileage on a vehicle in its first year of business use, you can switch to actual expense in later years. The reverse is more restricted.
What counts as a business mile
Business miles are miles driven for business purposes. For a real estate agent, that typically includes:
- Driving to and from listings (your own and previewing for clients)
- Driving to showings
- Driving to open houses you're hosting
- Driving to closings
- Driving to inspections, appraisals, or walk-throughs
- Driving to the broker's office for business meetings
- Driving to client meetings — coffee shops, restaurants, their home or office
- Driving to industry events, MLS tours, and broker opens
- Driving to continuing education classes
- Driving to networking events, BNI meetings, chamber events tied to your business
- Driving to pick up signs, lockboxes, marketing materials
- Driving to the bank for business deposits or transactions
- Driving for closing gifts (picking them up, dropping them off)
The trip log should include date, miles, destination, and business purpose. "Showing on Las Olas" with a date is much better than "real estate stuff."
What doesn't count
Commuting
Driving from your home to a regular office is commuting, which is never deductible. If your home is your principal place of business (most agents qualify), trips from home to a temporary work location (showing, listing appointment, etc.) generally do count.
Personal errands during business trips
If you stop for groceries on the way home from a showing, the showing trip is business but the grocery detour is personal. You don't typically need to track the detour separately for small stops, but a long personal stop in the middle of a business trip splits the trip.
Spouse or family driving in your car
You can't deduct your spouse's commute even if they were in the car for a listing appointment.
Daily errands unrelated to a specific business activity
"Driving around looking at the market" isn't deductible. There has to be a specific business purpose.
The "principal place of business" rule
This concept matters more for agents than for most other 1099 workers. If your home is your principal place of business — meaning you handle administrative work there, store records there, plan listings and showings from there — then trips from home to listings, closings, and client meetings are generally deductible business miles.
If you spend most of your time at a broker's office and use it as your primary workspace, that's your principal place of business, and trips from home to the office become commuting.
For most modern agents, home is the principal place of business. The simplified home office deduction or actual home office expense documents this.
How to actually track miles
Mileage tracking apps
The most common solution. Apps run in the background and detect drives automatically. You categorize each trip as business or personal afterward.
Popular options:
- MileIQ — clean interface, swipe to categorize
- Everlance — combines mileage with expense tracking
- Stride — free option, decent for low-volume drivers
- Hurdlr — combines mileage and full bookkeeping
- QuickBooks Mileage — built into QuickBooks Self-Employed and QBO
For most agents, the $5–$10/month subscription is a no-brainer. The deduction it captures pays for the app many times over.
Manual logbook
A paper or spreadsheet log can work but rarely does in practice. Agents who try to manually log every trip almost always miss trips. If you go this route, log in real time, not at month-end.
Calendar-based reconstruction
Not allowed as a primary method, but can supplement an app — if you forgot to track a day, your calendar can help reconstruct trips for cross-checking.
What the IRS expects in a documented mileage log
If the IRS asks about your mileage deduction, they expect to see:
- Date of the trip
- Miles driven
- Destination (address)
- Business purpose
Apps capture all of this automatically. A spreadsheet works if it has the same fields. "I drove a lot for work" with a total at the end of the year is not acceptable documentation.
The log doesn't have to be perfect — small omissions are normal. But it has to be contemporaneous (kept as you go, not reconstructed at audit time) and reasonable.
How big the deduction can get
The IRS standard mileage rate for business use changes annually — recent years have been in the $0.65–$0.70 per mile range. Multiplied by the miles a working agent drives, the deduction is substantial:
- 15,000 business miles × $0.70 = $10,500 deduction
- 25,000 business miles × $0.70 = $17,500 deduction
- 40,000 business miles × $0.70 = $28,000 deduction
An agent in a federal tax bracket of 24% who also pays self-employment tax sees a roughly 39% combined savings on this deduction — meaning the $17,500 deduction in the middle example translates to about $6,800 in actual tax savings.
Confirm the current year's rate with the IRS or your CPA before claiming it.
Common mistakes
1. Estimating annual mileage at year-end
The classic "I drive a lot for work, let's say 18,000 miles" approach. Doesn't survive an audit. Even if the number is honestly close to right, lacking contemporaneous documentation means the deduction can be disallowed.
2. Claiming 100% business use
If you have one vehicle and use it for personal trips too, you can't claim 100% business miles. Be realistic — most agents land at 60–85% business use of their primary vehicle.
3. Mixing methods between years inconsistently
Once you've claimed actual expenses (depreciation) on a vehicle, the rules limit your ability to switch to standard mileage. Pick a method early and stick with it.
4. Deducting commuting as business
Even with a home office, certain trips can still be commuting — for example, daily trips to a real estate office where you have a desk. Be honest about the nature of each trip.
5. Forgetting the second vehicle
If you have multiple vehicles you use for business, track each separately. They can have different business-use percentages and may even use different methods.
If you also lease your vehicle
Leased vehicles work under both methods but with some quirks:
- Standard mileage — same calculation, but you must use this method for the entire lease term once chosen
- Actual expense — deduct the business-use portion of lease payments, plus other vehicle expenses. The IRS has "lease inclusion amounts" for luxury vehicles that reduce the deduction
Higher-end vehicles often benefit from actual expense method because lease payments are substantial. Lower-priced cars usually do better on standard mileage.
Frequently asked questions
Not necessarily, but you do need to know your total miles for the year (business + personal) if you ever switch to actual expense or if the IRS asks about business-use percentage. Most apps capture all trips and let you categorize, which makes this easy.
Reasonable reconstruction from calendar entries and listing/showing records is acceptable as a one-time gap. Doing this every month isn't.
Some do. If your brokerage reimburses you for business mileage at the standard rate, the reimbursement isn't taxable income to you and you don't claim the deduction. If they reimburse at less than the standard rate, the difference may still be deductible.
Business parking and tolls are deductible on top of mileage (under either method). Track them separately as expenses, not as part of your mileage log.
How we help
Most of our bookkeeping clients use mileage tracking apps that integrate with QuickBooks Online. We make sure the mileage gets pulled in correctly and shows up properly at tax time. Spanish-friendly support available.