Vehicle Expenses (Actual Method)
Deduct actual car expenses: gas, insurance, repairs, depreciation based on business use %.
Tax Form
Schedule C, Line 9
Estimated Savings
$1,000-5,000/year
IRS Reference
Publication 463
Income Level
How It Works
The actual expense method lets you deduct the business percentage of all vehicle costs: gas, oil, repairs, insurance, registration, depreciation, and lease payments. You calculate business use percentage by dividing business miles by total miles driven. This method may save more than standard mileage for expensive vehicles.
IRS Rules & Requirements
- Track total miles AND business miles throughout the year
- Calculate business use % = business miles ÷ total miles
- Deduct that % of: gas, repairs, insurance, registration, depreciation
- Cannot switch from actual to standard mileage for same vehicle
- Must choose actual method in first year if depreciating vehicle
Real Examples
10,000 business miles / 15,000 total miles = 67% business use
Annual car expenses of $6,000 × 67% = $4,020 deduction
Plus depreciation on business portion of vehicle value
Common Mistakes to Avoid
- Not tracking total miles (only tracking business miles)
- Switching methods mid-vehicle without understanding rules
- Forgetting to include all eligible expenses
- Not keeping receipts for gas, repairs, and maintenance
Pro Tip
Compare standard mileage vs actual expenses each year (for vehicles eligible for either method). Use whichever gives you the larger deduction.
Related Deductions
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