California and Texas business mileage rules when you cross a state border

What to take away

The federal rate decides the deduction, not the state line

A trip that crosses from California into Texas is one trip on the federal return. Deduct every business mile at the IRS standard mileage rate on Schedule C, line 9. For 2025 the business rate is 70 cents per mile.

Publication 463 explains what counts as a business mile and when the standard rate can replace actual costs.

The states apply their own rules to that federal number. California starts from it. Texas never sees it, because no personal income tax return exists to receive it.

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So the rate question has one answer in both states. The return question has one answer too: a California return, and no personal Texas return.

California conforms, then apportions

The Franchise Tax Board starts with federal adjusted gross income, so the Schedule C car and truck expense you compute federally carries into the California return. About Schedule C (Form 1040) shows where that expense is reported.

A vehicle adjustment, when one is needed, belongs on California Schedule CA (540), Part I, Section B, line 3, the business income or loss line. Most border-crossing drivers leave it empty. California parts company with federal treatment on some vehicle items, mainly depreciation.

An out-of-date rate sheet is the usual source of error, so it pays to read mileage rates with a sceptical eye before copying a figure onto a return.

Texas: no personal return, but a franchise tax threshold

Texas levies no personal income tax. A sole proprietor there has no state return on which to claim mileage, and the Comptroller publishes no competing individual rate.

The entity question is separate. A sole proprietorship and a single-member LLC are not taxable entities for franchise tax purposes. A multi-member LLC, corporation or partnership doing business in Texas files a franchise tax report.

For reports due in 2024 and later, no tax is due when total annualized revenue is at or below $2.47 million. Above it, rates are 0.375% for retail and wholesale and 0.75% for other entities, applied to margin. Vehicle costs reach margin only if they qualify as cost of goods sold.

Drive into New Mexico or Louisiana instead and that state's income tax takes over, which is where state business tax examples show how far neighbouring rules diverge.

Example: 400 business miles split across a state line

California and Texas share no border, so a trip touching both crosses other states in between. The arithmetic does not care.

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The Texas miles keep their federal value, which is the only value they carry in this pair. Log the crossing point itself, so the 250 and the 150 are recorded rather than estimated.

Apportioning vehicle expenses between two state returns

For a sole proprietor the split is a mileage fraction. In-state miles go over total business miles, and the result applies to the deductible vehicle expense.

Do not apply an income apportionment factor to direct vehicle costs. California apportions non-resident business income largely on sales, but car and truck expenses follow the miles that produced them. Our notes on state business tax cover where those adjustments surface.

IRS Tax Topic 510 covers standard mileage against actual expenses. The actual method changes the arithmetic, not the need for a state split.

Records that survive two state questions

Both states fall back on federal substantiation. A log showing date, destination, business purpose and miles is the baseline. Add a state column and the apportionment numerator appears without guesswork.

Keep the records that tie the log to real work. Client names and calendar entries carry the business purpose. A fuel receipt from a stop across the line can support the route, but it does not replace the log entry. The state business tax requirements each state publishes are worth checking before you file.

Common questions

Does California use the federal standard mileage rate?

Yes. The Franchise Tax Board starts from federal adjusted gross income and accepts the federal car and truck expense, subject to the state's depreciation differences.

Can I claim a mileage deduction on a Texas personal income tax return?

No. Texas has no personal income tax, so no individual Texas return exists. The federal Schedule C deduction still covers miles driven in Texas.

How do I split business miles between California and Texas on one trip?

Count miles by state and note the crossing point. The federal return takes the total, California takes the California miles, and Texas takes none at the personal level.

What does Texas franchise tax have to do with vehicle expenses?

Little, unless the entity computes margin on cost of goods sold. Franchise tax applies to taxable entities above the $2.47 million revenue threshold.