Vehicle Expense Reimbursement Using the IRS Actual Expenses Method

The "Actual Expenses" method is an alternative to the "Standard Mileage Rates" method for logging and deducting vehicle expenses. Use this program to log your actual expenses, such as gas, parking, insurance and depreciation. You tax-deduction is based on the expenses logged, pro-rated to the business-use of the vehicle.

About this program

Use the "Actual Expenses" program if you drive your privately-owned vehicle for work, and prefer to reimburse actual expenses of your vehicle instead of cents-per-mile. This program allows you to log both fixed and variable costs of your vehicle, such as gas, maintenance, parking, insurance, and depreciation.

In addition to expenses, the app logs your mileage and calculates the business use of the vehicle based on the portion of your business miles out of the total miles. This requires that you classify all your trips using hashtags. See the section "How this program works" for further details.

How to use this program

You can choose this program for a vehicle you personally own or lease. You cannot use this program with a vehicle owned by the business (i.e. company car), or if you use a rental car.

The Actual Expenses method requires more work than the Standard Mileage Rates method, because you have to log your vehicle expenses, in addition to mileage. However, depending on your vehicle, this method may result in higher deductions compare to using Standard Mileage Rates.

Actual Expenses

When using this program, you should log all vehicles expenses for operating and maintaining your vehicle. In your reports, the program will pro-rate the total expenses amount to the business use of the vehicle, based on the number of business miles out of the total miles.

Business Use

Trips are classified using hashtags. Any trip tagged with a hashtag belonging to a mileage rate defined in your account is considered a business trip. For instance, trips tagged as #business, #medical or #charity are business trips because these hashtags belong to the standard mileage rates. If add a custom mileage rate with the hashtag #uber, then trips classified as #uber will also be business trips.

How this program works

• Trips - you should classify all your trips to ensure correct calculation of the business use of the vehicle (see "Business Use" sub-section above). Unclassified trips are considered personal trips.
• Expenses - you should log all vehicle expenses, including fixed costs (such as depreciation and insurance) and variable costs (such as gas and repair). The total reimbursement amount is calculated by multiplying the expenses logged by the (%) business use of the vehicle.
• Reports - your reports include both mileage and expense sections, along with a calculation of the business use and the tax-deductible amount for the report period.
• Report Rules - by default, reports generated by this program are not restricted to a single vehicle. For example, if you use two vehicles, and selected the Actual Expenses program for both of them, your report will include both vehicles. The total tax-deductible amount in the report will be based on the expenses and mileage logged with both vehicles combined. You can change this behavior by selecting a specific vehicle in your report rule.

Conditions

If you claim a deduction based on actual car expenses, you must complete IRS Form 2106, Part II, Section C, and, unless you lease your car, Section D.

Disclaimer

Psngr does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors.

Source: IRS publication 463