What is the Actual expense method?
The actual expense method is a vehicle deduction approach that allows businesses to deduct all actual vehicle operating costs rather than using the IRS standard mileage rate, with deductible amounts calculated by multiplying total expenses by the vehicle's business use percentage. Qualifying expenses include fuel, maintenance, repairs, insurance, registration fees, depreciation, lease payments, and loan interest. This method often provides larger deductions than the standard mileage rate for high-value vehicles or those with high operating costs. Businesses must maintain detailed records of all Vehicle expenses and calculate the business-use percentage based on contemporaneous mileage logs that show business versus personal miles driven throughout the tax year.
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