So there’s a new investing and business trend out there, and it’s to start a rental car company with Turo.
And there are already people who are making thousands of dollars a day with their Turo rental car company.
But this is a fairly new trend and a lot of people are learning throughout the way. And eventually, tax time will come.
So in this post, we’ll give you the top write-offs for Turo rental car company, so you can leverage the tax system on your way to growing your new business.
So for those who haven’t heard yet, let us quickly talk about what a rental car company is and a little bit about Turo.
What is a Rental Car Company?
The concept of a rental car company is simple.
You rent a car out, someone pays you every day while they are using your car (and sometimes for mileage), and eventually returns the car back to you.
Previously, for someone to start a rental car company, you needed hundreds of thousands of dollars so that you could buy:
- the inventory for cars,
- get a location, and
- hire staff to manage all the operations.
And we all know who those big companies are: Enterprise, Hertz, Avis, etc., and with technology, of course, things have changed.
Just like the hotel industry is being disrupted by Airbnb, the rental car industry is now being disrupted by Turo.
What is Turo?
So basically Turo is like the Airbnb of cars.
And like with Airbnb, you can list your car on Turo for free and any communication between people wanting to reserve your car is done through the app.
Turo vs Airbnb
The big difference between the two is that with Airbnb, you don’t have to physically meet anyone, you can remotely give them access to home and just walk in.
Whereas with Turo, you need to physically hand over the car and then figure out a way to get back to your desired location.
So right now, for most people, Turo can be a little bit more hassle when you are trying to build passive income from renting your car without a little help.
But it can absolutely be done.
How Income is Reported for a Turo Company
So according to Turo, if you make more than $20,000 and had over 200 trips, you will receive a 1099K which will report how much income you made by the month.
If you made less than $20,000 then you may not receive a 1099K.
But, you still need to report your income from your Turo business. So that means, you need to maintain bookkeeping of your business revenues.
And of course, if you are a sole proprietor or a single-member LLC, you will report your revenue on Schedule C.
So the tax writeoffs we’re going to share with you today, are tips we would give to someone who is trying to build an absolutely passive Turo rental car company.
This is so their car can earn them money while they sleep.
7 Tax Write-offs for Turo Rental Company
If there is one thing we know about renters is that they don’t always take care of the property like it’s their own.
And if you’re anything like us, then you are probably a little concerned about someone destroying your car whether it’s from the inside or out.
So that’s why car insurance is so important.
But because this is a business, you’re going to want a top-tier level of insurance that gives you the most protection.
Now we’re not going to go through those specifically, but what you should know is that you can absolutely write off car insurance.
In addition to the actual car insurance, you may need some general business insurance to protect your car company from outrageous claims.
2. A pickup location
Now, this is of course optional, but if you want to make your rental car company a totally passive business…
…and you want to maximize your chances of getting books, then having a convenient pickup location may be worth investing in.
So this would technically be like a “rent” expense where you find a nearby lot or garage, right?
For instance, maybe it’s near an airport or maybe it’s near another big rental car company.
You work with the lot or garage owner, rent out space, and maybe get a lockbox or something similar so that you can just drop the keys in and send pickup/drop-off instructions to your book.
Just an idea, and we know there may be other ways to handle this.
But the key takeaway is that this is one of the tax write-offs for Turo rental car company.
3. Staff or manager
So, just like you would hire a property manager for a real estate deal, you can hire a “fleet” manager for your rental car company.
And of course, this is optional.
But if you want to be hands-off and have someone else doing the heavy lifting like driving to drop off the cars to your renters or picking the cars up, then having someone to do this may be ideal.
This is especially if you want to scale your operations. This means you want to have 10, 20, or 30+ cars on the roads.
You’re definitely going to need some staff to help you out with this.
And of course, payroll costs are all deductible expenses for your rental car company.
4. Vehicle expenses
So you can write off anything in the categories that we’re going to share, and you will multiply it by the business use percentage to get your tax write-off.
- Maintenance – This, of course, will be oil changes, tire rotations, air filters, etc.
- Repairs – Say if you need to replace the tires, engine, or transmission for example. You can write-off cleaning and car washes as long as it is 100% related to your Turo rental.
- Registration and fees – These are the fees charged by your state or city, as well as a big one – the depreciation of your car value.
One other possible deduction worth mentioning is deducting the lease costs if the car you are renting out is leased.
Lessees should always first check the stipulations of their lease before renting their car out. If it’s okay to rent out your car per your lease agreement.
5. Turo fees
We know fees are so annoying, but still, Turo has to make money for providing us with such an incredible opportunity and building demand for you.
So, of course, there are fees that can incur. If you happen to encounter them, don’t worry because at least you can write them off.
Some popular fees that you may experience are host trip cancellation fees, say if you cancel a trip in less than 24 hrs for example.
There are host no-show fees, cleaning violations fees, and vehicle misrepresentation fees, just to name a few.
6. Marketing and advertising
Lastly on our list of tax write-offs for Turo rental company, as we just mentioned Turo, does do a lot of the heavy lifting when it comes to marketing and advertising your rental car company.
But if you want to be proactive and ensure your success, you may consider running ads on other car directories.
Maybe you want to build a website or do a little social media marketing. The good news is that these marketing and advertising expenses are all deductible for your business.
7. Home office deduction
At some point, you have to manage the operations of your Turo rental car company. And unless you have a big fleet, we’re guessing that you’re doing most of your work from home.
Well by turning one of your rooms/areas into an office space, you are able to claim the home office deduction.
This is a nice boost to your take write-offs in deductions, especially since you don’t actually have to spend any more money.
So there you have it, our top 7 tax write-offs for Turo rental car company.
Now, of course, there are many more write-offs that you can claim but these are some of the most obvious ones.
And for everything about taxes, LYFE’s tax experts are always here to help you.
Check out our CPA tax services here, or contact us today!