How to Claim Mileage Deductions for Real Estate Agents

For self-employed real estate agents, vehicle expenses represent a significant operational cost. The ability to deduct the costs of using a personal vehicle for business is a way to manage taxable income. Understanding and correctly applying these rules can substantially impact an agent’s annual tax liability.

Identifying Deductible Business Mileage

A real estate agent’s travel is deductible when it is directly related to business. Deductible activities include:

• Driving to show properties to potential buyers
• Meeting with sellers to discuss listings
• Traveling to attend property closings
• Previewing listings for clients
• Driving to and from open houses you are hosting
• Attending real estate seminars and professional networking events

The main non-deductible category is commuting, which the IRS defines as travel between your home and your main place of business. For many agents, what counts as a commute depends on their “principal place of business.”

If an agent’s brokerage office is their principal place of business, the drive from home to that office is a non-deductible commute. Any subsequent trips from the office to meet clients or visit properties are deductible. If an agent maintains a qualifying home office as their principal place of business, trips from the home office to a client’s home or a property showing are deductible as travel from one workplace to another.

Methods for Calculating the Deduction

Taxpayers have two options for calculating their vehicle deduction: the standard mileage rate or the actual expense method. An agent must choose one method per vehicle for the year, though the choice can be changed annually under certain conditions. The decision between these methods depends on the vehicle’s cost, the number of miles driven, and diligence in record-keeping.

The standard mileage rate is a simplified approach. To calculate the deduction, an agent multiplies their total business miles for the year by a rate the IRS sets annually. For 2025, the rate is 70 cents per mile. This rate is based on an annual study of the fixed and variable costs of operating a vehicle. Using this method, an agent who drives 10,000 business miles could claim a deduction of $7,000. Parking fees and tolls from business travel can be deducted separately.

The actual expense method requires more detailed tracking. This method involves tallying all the costs of operating the vehicle for the year, including:

• Gasoline
• Oil changes
• Repairs and tires
• Insurance
• Registration fees
• Depreciation

To find the deductible amount, an agent must determine the business-use percentage by dividing total business miles by total miles driven. This percentage is then applied to the total vehicle expenses. For example, if total vehicle costs were $12,000 and the car was used for business 75% of the time, the deduction would be $9,000.

Required Records and Documentation

The IRS requires detailed and contemporaneous records to substantiate any claim for vehicle expenses. A reliable mileage log is required for either method. For each business trip, the log entry must include the date, total miles, the destination, and a clear business purpose. A purpose such as “Client Meeting” is insufficient; a more descriptive purpose like “Met with J. Smith to view 123 Main St.” provides the necessary detail.

This log should be kept “contemporaneously,” meaning the records are made at or near the time of travel. Recreating a log at the end of the year from memory is not compliant with IRS rules and can jeopardize the deduction if audited. Digital tracking apps or a physical logbook are both valid if maintained properly.

For agents using the actual expense method, the record-keeping is more extensive. In addition to the detailed mileage log, they must retain proof, such as receipts and invoices, for every expense they claim. Without this documentation, the expenses cannot be included in the deduction.

Claiming the Deduction on Your Tax Return

An agent reports their total vehicle deduction on their federal income tax return. For sole proprietors, this deduction is claimed on IRS Form 1040, Schedule C, “Profit or Loss from Business.” The total deduction is entered in Part II, “Expenses,” on the line for “Car and truck expenses.”

Any taxpayer claiming vehicle expenses must also complete Part IV of Schedule C, “Information on Your Vehicle.” This section requires specific details, including the date the vehicle was placed in service for business and the total miles driven for business, commuting, and other personal purposes.

This section also asks if the taxpayer has evidence to support their deduction and if that evidence is written. Answering these questions accurately is necessary for a valid tax filing. The information in Part IV allows the IRS to verify the context of the deduction claimed in Part II.