{"id":782,"date":"2016-02-18T12:57:03","date_gmt":"2016-02-18T20:57:03","guid":{"rendered":"https:\/\/turo.com\/blog\/?p=782"},"modified":"2025-03-20T08:13:13","modified_gmt":"2025-03-20T15:13:13","slug":"how-to-save-with-auto-tax-deductions","status":"publish","type":"post","link":"https:\/\/turo.com\/blog\/news\/how-to-save-with-auto-tax-deductions\/","title":{"rendered":"A breakdown of auto tax deductions"},"content":{"rendered":"\n

*Editor’s note: Here’s an easy-to-understand breakdown of how (and what) you may be able to claim from your Turo car sharing business. The information in this post is largely still accurate in 2022, but this is NOT tax advice. Each person\u2019s tax accountability is unique, so please consult your personal tax advisor for the most up-to-date guidance.<\/em><\/p>\n\n\n\n

**Editor’s note: We had initially posted this with dated information regarding the income threshold for 1099s. The numbers have been updated as of Feb 26, 2016, and we sincerely apologize for the misprint.<\/em><\/p>\n\n\n\n

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One of the biggest benefits of sharing your car on Turo is the income. But, as you\u2019re no doubt aware, income may be subject to taxes. One way to reduce your tax bill is to take advantage of all your legally-allowable tax deductions, which may include certain car-related expenses when you use your car to earn income.<\/span><\/p>\n

As we\u2019re sure you know, however, each person\u2019s personal tax situation is different and nuanced, depending their state of residence and their particular scenario, so please understand that the following is hypothetical and purely educational. <\/span><\/p>\n

Check out <\/span>H&R Block<\/span><\/a>, <\/span>the H&R Block blog<\/span><\/a>,\u00a0<\/span>TurboTax<\/a>, or the IRS itself<\/span>\u00a0for more detailed information, and always consult your tax professional before filing your return. <\/span><\/p>\n

What is a tax deduction?<\/span><\/h3>\n

For starters, let\u2019s answer the most basic question.<\/span><\/p>\n

A tax deduction is an IRS-allowed method to reduce how much income tax you owe to the government when you file your tax return each year. Deductions are one of the most common means of reducing your taxes for typical individual or family taxpayers.<\/span><\/p>\n

A deduction can be used to offset your income, thereby giving you a lower taxable income. As a simplified example, if you earned $50,000 in 2015, and had $5,000 in eligible deductions, your adjusted income would be $45,000 for tax purposes. If you are a single filer (not married), your federal tax rate in this circumstance is approximately 25%. Without deductions, your total tax bill is $12,500. With a $5,000 deduction, your tax bill would be $11,250, which is $1,250 lower.<\/span><\/p>\n

Each taxpayer qualifies for a standard deduction of $6,300 in 2015 if you\u2019re single, or $12,600 if you\u2019re married filing jointly. If your total eligible itemized deductions are lower than that amount, you can simply use the standard deduction as your personal tax deduction. If it\u2019s higher, you may be able to file an itemized tax return to lower your tax bill further. Please note that this is a simple example, and many other situations exist, including the potential application of <\/span>Alternative Minimum Tax<\/span>.<\/span><\/p>\n

What might I be able to deduct?<\/span><\/h3>\n

When you sign up for Turo and start earning money, the IRS may treat your income as if you own a small business. At the end of the year, <\/span>Turo may send you a 1099<\/span><\/a> depending on your year’s earnings. If you earned $20,000 in 2015 and had over 200 trips with Turo, you will receive a 1099K; if not, you won\u2019t receive a 1099K from Turo. The income you earn from sharing your car is taxable at the rate determined by your federal and state income tax bracket level, and you need <\/span>to claim and pay taxes on your Turo\u00a0income even if you don\u2019t receive a 1099<\/span><\/a>.<\/span><\/p>\n

As an owner sharing your car on Turo, you may qualify to deduct some related business expense allowed by IRS guidelines. You will enter your business income from Turo and all of your expenses you calculate using the steps below on a form called <\/span>Schedule C<\/span><\/a>, which is added onto the regular 1040 you file each year.<\/span><\/p>\n

The method we use to calculate deductions requires tracking all of your car expenses (including business mileage) and keeping all of your receipts related to the car you are sharing on Turo. <\/span><\/p>\n

It\u2019s important to note that not all of these expenses are deductible in every circumstance; again, talk to your tax professional to see what items, if any, you\u2019ll be able to deduct.<\/span><\/p>\n

How to deduct line items<\/span><\/h3>\n

First, collect all of your receipts related to car expenses. You could also track your spending using a program like <\/span>Mint.com<\/span><\/a>, but you\u2019ll still need to keep receipts. You can include anything in the following categories (multiplied by business use percent as described further below), and they may be tax deductible:<\/span><\/p>\n