If you’re using Turo to rent out your car and earn extra income, understanding the tax deductions available to you is critical to keeping more of your hard-earned money. Turo hosts are considered self-employed, which means you’re eligible to write off a variety of expenses related to your car-sharing business. Let’s break down the most common and valuable deductions you can claim.
1. Vehicle Depreciation
Depreciation is one of the biggest write-offs for Turo hosts. The IRS allows you to deduct a portion of your vehicle’s value each year, accounting for wear and tear. You can calculate depreciation using either the straight-line method or the accelerated method.
Pro Tip: If you’re renting out your vehicle exclusively on Turo, you may be able to deduct 100% of its depreciation. However, if you use the car for both personal and Turo purposes, you’ll need to prorate the deduction based on the percentage of business use.
2. Insurance Costs
The insurance you carry for your Turo business is deductible. This includes both the cost of the Turo insurance plan you select for rentals and any additional business-related coverage you purchase.
Note: Personal auto insurance is generally not deductible unless it’s specifically related to your Turo activities.
3. Interest on Auto Loans
If you’re financing the vehicle you’re renting out on Turo, the interest paid on your auto loan can be partially deductible. This deduction applies only to the portion of the vehicle’s use that is business-related. For example, if your car is used 75% of the time for Turo, 75% of the interest on the loan can be written off.
Tip: Keep detailed records of the time your vehicle is rented versus personal use to protect yourself in case of an audit.
4. Repairs and Maintenance
Any expenses related to keeping your car in good condition for rentals are fully deductible. This includes oil changes, tire replacements, brake repairs, and car washes. Remember, the cleaner and better-maintained your vehicle, the more likely it is to attract renters and earn you higher ratings.
5. Vehicle Storage Costs
If you rent a garage or dedicated space to store your Turo vehicles when they’re not in use, this expense is deductible. This is especially relevant for hosts with multiple vehicles or those operating in urban areas where parking comes at a premium.
6. Tools and Equipment for Vehicle Care
Purchases like vacuums, tire inflators, cleaning supplies, or diagnostic tools for maintaining your Turo vehicle are also deductible. These smaller costs add up over time and are necessary for keeping your car ready for renters.
7. Cleaning and Detailing Costs
Providing a spotless car is essential for keeping your Turo renters happy, and the IRS recognizes this as a necessary business expense. Costs for professional cleaning services, detailing, or even cleaning supplies can all be deducted.
8. Parking and Toll Fees
If you pay for parking spaces or incur toll fees while delivering your car to renters or maintaining it for Turo purposes, those costs are deductible. Be sure to keep detailed records of these expenses to avoid any confusion.
9. Licenses and Registration Fees
If your car is used exclusively for Turo, registration and licensing fees are deductible. For cars with mixed personal and business use, you’ll need to prorate the expense based on the business use percentage.
10. Professional Services
If you hire an accountant, bookkeeper, or lawyer to help with your Turo business, these costs are fully deductible. Professional services can help you stay compliant with IRS regulations while maximizing your deductions.
Work with a CPA Who Understands Turo
Running a Turo business is a great way to earn extra income, but it comes with unique tax challenges. At Wong CPA Advisory, we work with many Turo hosts and specialize in helping you take advantage of every available deduction. Our experience with Turo businesses ensures you’re not leaving money on the table and that your taxes are filed correctly.
If you’re looking for personalized tax advice tailored to your Turo business, contact us today. Let us help you maximize your earnings and minimize your taxes!