Mileage tax glossary
Plain-language definitions for the 43 terms self-employed drivers run into most often. From Schedule C to deadhead miles to FAVR.
All terms (alphabetical)
Tax forms and filing
11 terms
1099-MISC
The IRS form for miscellaneous payments such as rent, prizes, and settlements, reportable at $2,000 or more for 2026. It carried contractor pay through tax year 2019; from 2020 that moved to the 1099-NEC.
1099-NEC
The form payers issue to report $2,000+ in nonemployee compensation (2026 threshold, raised from $600). If you got one, you are self-employed for IRS purposes.
EIN (Employer Identification Number)
A federal tax identification number for a business, which a self-employed driver can use in place of a Social Security number on client and tax forms.
Form 4562
The IRS form used to report depreciation, Section 179 expensing, and bonus depreciation for business assets, including vehicles.
Form P87
HMRC's form for UK employees claiming tax relief on mileage when employer reimbursement is below the AMAP rate.
Form T2125
Canada's equivalent of Schedule C. Where self-employed Canadians report motor-vehicle expenses to the CRA.
QBI Deduction (Section 199A)
A federal deduction (Section 199A) that lets eligible self-employed taxpayers deduct up to 20% of their qualified net business income.
Quarterly Estimated Tax
Four federal tax payments per year that self-employed workers make in lieu of W-2 paycheck withholding.
Safe Harbor (Estimated Tax)
A rule that protects you from an underpayment penalty if your estimated tax payments meet a set percentage of your prior-year or current-year tax.
Schedule C
The federal form self-employed workers use to report business income and expenses, including the mileage deduction.
Schedule SE
The federal form that calculates self-employment tax (Social Security + Medicare) for self-employed workers.
Deduction methods and rules
10 terms
Actual Expenses Method
Deduct real vehicle costs times your business-use percentage, instead of using a flat per-mile rate.
Bonus Depreciation
An additional first-year depreciation allowance for qualifying business property, including vehicles, claimed on top of regular depreciation.
Business Purpose
The IRS-required reason for a drive. Without a business purpose, the mile is personal.
Business-Use Percentage
Business miles divided by total miles. Used to scale the actual-expenses deduction.
Commuting Rule
Drives between home and a regular workplace are personal, not business. Several exceptions apply.
Depreciation
Deducting the purchase cost of a business vehicle over its useful life, instead of all at once.
Home Office Exception
If you have a qualifying home office, drives from home are business miles, not commuting.
Section 179
A federal tax provision that lets businesses deduct the full cost of qualifying vehicles in the year of purchase, instead of depreciating them over time.
Standard Mileage Rate
The IRS-published per-mile deduction amount. 76 cents per business mile from July 1, 2026 (72.5 cents January through June).
Temporary Work Location
A job site expected to last one year or less. Drives there are business miles, even from home.
Driver concepts
7 terms
Adjusted Gross Income (AGI)
Your total income minus specific adjustments. It is a key figure that many other tax calculations and state returns build on.
Contemporaneous Log
A mileage log created at or near the time of the trip. What the IRS expects to see in an audit.
Deadhead Miles
Business miles driven without a paying customer or revenue at the destination. Still deductible.
Logbook Method
Keeping a 12-week sample log to establish business-use percentage. Used by CRA in Canada and ATO in Australia.
Mileage Reimbursement
Payment from an employer to a worker for using their personal vehicle for work.
Odometer Reading
Start-of-year and end-of-year vehicle odometer numbers. Required to verify total mileage on the tax return.
Tolls and Parking
Business-related tolls and parking fees that are deductible separately, on top of the standard mileage rate or actual expenses.
Worker classification
4 terms
Gig Economy
Platform-based work where workers are independent contractors paid per task. Rideshare, delivery, and similar.
Independent Contractor
A worker classified as self-employed for tax purposes. Receives 1099 income instead of W-2 wages.
Self-Employment Tax
The 15.3% tax on net self-employment income that funds Social Security and Medicare.
Sole Proprietorship
The simplest business structure. One person, no separate legal entity, income flows to the owner's personal tax return.
International equivalents
4 terms
AMAP
HMRC's UK mileage rates for employees. 55p/mile for the first 10,000 miles (raised from 45p in April 2026), 25p/mile after.
Car Allowance
A flat monthly payment from an employer for vehicle use. Generally fully taxable.
Cents per Kilometre
Australia's simplest mileage deduction method. A flat per-km rate up to 5,000 km per year.
FAVR
A hybrid US reimbursement model: fixed monthly stipend plus a variable per-mile rate.
Audit and compliance
7 terms
Depreciation Recapture
Adding previously deducted depreciation back into income, triggered when business use of a vehicle falls below a threshold or the vehicle is sold at a gain.
IRS Audit
A review of a tax return. Mileage deductions are one of the most-questioned line items.
Listed Property
An IRS category of assets, including passenger vehicles, that carries stricter substantiation and business-use recordkeeping rules.
One Big Beautiful Bill (OBBBA)
Federal legislation that made permanent the suspension of unreimbursed employee expense deductions originally introduced by the TCJA.
Substantiation
The IRS requirement to support a deduction with adequate records, including the date, destination, business purpose, and miles for each trip.
Tax Cuts and Jobs Act (TCJA)
The 2017 federal tax law that suspended unreimbursed employee expense deductions, removing the ability of W-2 employees to deduct work mileage on federal returns.
Tax Deduction vs Tax Credit
Deductions reduce taxable income. Credits reduce tax owed. Same dollar of credit is worth more.