Vehicle Deduction: Actual Expense Method

• If your vehicle was not purchased this year, then the tax basis for depreciation purposes will be the lesser of the fair market value on the date converted to business use, OR the original purchase price of the vehicle. To determine the fair market value when converted to business use, Kelley Blue Book would be a good resource.

Method choice is partly one-way. To ever use the standard mileage rate on a car you own, you must choose it in the car's first year of business use; after that you can switch between methods (with straight-line depreciation once you switch back). If you start with actual expenses in year one, standard mileage is off the table for that vehicle for good. We run both numbers in year one before locking in.

• Use a mileage tracking app (e.g., MileIQ, QBO only if using QBO already) or a paper log/ Google sheet.
• Record date, purpose, starting and ending odometer readings for each trip.
• Keep the log all year; it's the backbone of the deduction.

Charge fuel, maintenance, insurance, tolls, parking, and registration to a dedicated business card or account. Depreciation (or lease payments) and business-use loan interest also count toward the actual-expense total; we calculate those from your purchase documents, so keep the bill of sale and financing paperwork from Step 2 handy.

Segregated spending makes every deductible expense easy to document.

Provide your mileage summary, receipts, and income statement.

We'll calculate depreciation and the actual expense deduction using the business use percentage you recorded.

Summary: value the car → track miles → pay all auto costs through the business → hand us the records so we can capture the full deduction.