Actual Expense Method.
In plain English
The actual expense method is a way to deduct car costs by adding up what you really spent (gas, oil, repairs, tires, insurance, registration, and depreciation) and deducting the share tied to business use. You figure that share by dividing business miles by total miles driven for the year. If 70% of your driving was for business, you deduct 70% of those real costs. It takes more recordkeeping than the standard mileage method but can produce a bigger deduction for expensive vehicles or high repair years.
01Why it matters
For a pricey car, a gas-guzzler, or a year with big repairs, the actual expense method can beat the flat mileage rate by a wide margin, which is real money, but it demands you keep every receipt and an accurate mileage split.
02The math, step by step
Omar spends $9,000 on his car for the year across gas, insurance, repairs, and depreciation. His log shows 18,000 total miles, 12,600 of them for business, which is 70%. Under the actual expense method he deducts 70% of $9,000, or $6,300. He compares that to what the standard mileage method would give and uses whichever is larger, within the IRS rules for switching.
03What this is NOT
The actual expense method is not the per-mile flat rate. It uses your real, itemized car costs times your business-use percentage, while the mileage method uses one IRS rate per mile. You generally cannot use both on the same car in the same year.
04Receipts
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