Actual Expenses Method
Quick definition
Deduct real vehicle costs times your business-use percentage, instead of using a flat per-mile rate.
The actual expenses method totals your year's vehicle costs and multiplies by your business-use percentage. The alternative to the standard mileage rate.
What you can deduct
- Gas
- Oil and routine maintenance
- Repairs
- Insurance
- Registration fees
- Lease payments OR depreciation (not both)
- Tires
How the math works
Add up all the qualifying costs for the year. Multiply by your business-use percentage (business miles divided by total miles). That is your deduction.
When it wins
Actual expenses can produce a larger deduction than standard for high-cost vehicles, especially in the first few years when depreciation and Section 179 are highest. Owners of luxury vehicles, pickup trucks used heavily for business, and high-mileage cars with expensive insurance often see actual expenses come out ahead. See the full comparison.
Related terms
Standard Mileage Rate
The IRS-published per-mile deduction amount. 72.5 cents per business mile for 2026.
Business-Use Percentage
Business miles divided by total miles. Used to scale the actual-expenses deduction.
Depreciation
Deducting the purchase cost of a business vehicle over its useful life, instead of all at once.
Section 179
A federal tax provision that lets businesses deduct the full cost of qualifying vehicles in the year of purchase, instead of depreciating them over time.
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