The Actual Expenses method
There are two methods of calculating the business use of your car. You’ll want to calculate your vehicle expenses each way and then choose the method that yields the largest deduction for you.
The first method is called Actual Expenses. It is based on the expenses you actually incur in the operation of your vehicle. It includes things like:
- gas purchases
- oil changes
- tire purchases
- car washes
- insurance
- and even vehicle depreciation
However, you can only claim the percentage of expenses that apply to the business use of your vehicle. To compute this, you must know how many miles you drove for business purposes and how much you drove for personal reasons. Lyft provides this important information on your Driver Dashboard as well as on your year-end “Yearly Stats” sheet. You can find it under the heading “Driver mode miles.” Add these miles to any other business miles to get your total business miles.
To find the percentage of your car’s use for business, divide your total business miles by the total number of miles you drove for the year (business + personal).
- For example, if your Yearly Stats show that you drove 5,000 driver mode miles and your odometer indicates you drove 10,000 miles for the year, divide 5,000 by 10,000.
- The result is 0.5, or 50%. This is the percentage of your vehicle’s business use.
You then multiply the total of your actual expenses by this percentage to arrive at your Actual Expenses deduction.
- For example, if your actual expenses were $9,500, you would multiply that figure by 50 percent.
- Your deduction would be $4,750 ($9,500 x .50 = $4,750).
The deduction is large, because the actual expenses are large. In the example above, the actual expenses include:
- $1,000 gas
- $1,500 insurance
- $6,000 lease payments
- $400 repairs
- $100 oil
- $500 car washes