Actual Expense Method
Quick definition
The actual expense method calculates a vehicle tax deduction using the business share of your vehicle's actual costs.
Full definition
With this method, you add up eligible vehicle expenses, such as fuel, insurance, repairs, registration, and depreciation or lease payments. You then calculate how much of those costs applies to business driving based on the share of your total miles driven for work.
For example, if 60% of your annual mileage is for business and your eligible vehicle expenses total $10,000, your deduction would be $6,000.
Self-employed drivers may use this method instead of the IRS standard mileage rate. However, it requires keeping receipts and itemized expense records, along with a mileage log to demonstrate business vs. personal use.
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