Business-Use Percentage

Business-use percentage is the share of a vehicle’s total annual miles that are business miles. It is computed as:

Business miles ÷ Total miles (business + commuting + personal) = Business-use %

Why it matters. Under the actual expense method, every cost you deduct — gas, insurance, repairs, depreciation, lease payments — must be multiplied by this percentage. You only get to deduct the business share.

The 50% MACRS cliff. Under IRC §280F(d)(4)(A), a passenger automobile is “listed property.” If business use is more than 50%, you can use accelerated MACRS depreciation, §179 expensing, and (when available) bonus depreciation under IRC §168(k). If business use is 50% or less, you are limited to straight-line depreciation under the Alternative Depreciation System (ADS) — and, if you previously claimed accelerated depreciation and then drop to ≤50% in a later year, IRC §280F(b)(2) requires you to “recapture” the excess depreciation as ordinary income. The 50% threshold is one of the genuine tax cliffs in the Code.

The standard mileage rate sidesteps this. Because the standard rate already bundles depreciation (35¢/mile of the 72.5¢ 2026 rate is the depreciation component, per Notice 2026-10 §4), and is applied on a per-mile basis, the business-use percentage matters less mechanically — you just multiply business miles by the rate. But you still need to know total miles to fill out Schedule C Part IV honestly, and your basis still adjusts at 35¢ per business mile for eventual sale.

Commuting is personal. Commute from home to a regular work location is not a business mile under Treas. Reg. §1.262-1(b)(5) — even if you make a business call from the car. (Home-office exception under IRC §280A can flip this; see our IRS Commuting Rule guide.)

Worked example. Kai keeps her phone running ADT all year. The trip log shows:

• Business miles: 30,000 (delivery routes)
• Commuting miles: 0 (she works from home; the dash zone is the first business stop)
• Personal miles: 5,000

Total: 35,000. Business-use % = 30,000 / 35,000 = 85.7%.

Because Kai is well above 50%, she can use accelerated MACRS or §179 on the actual-expense side. If she instead picks the standard rate, she deducts 30,000 × $0.725 = $21,750 and the 85.7% figure mostly serves as a reasonableness check on her log.