Alright, buckle up, Turo hosts! We’re about to embark on a tax-saving road trip, and trust me, you’re going to want to ride shotgun for this one. If you’re renting out your cars on Turo, you might be overlooking some juicy tax deductions that could keep your wallet happy and your accountant impressed. Yes, tax deductions CAN be fun—especially when it means you’re saving cash!

Auto-tax deductions can be confusing at first glance, but once you know the ins and outs, you’ll find that there are plenty of ways to save. In this guide, we’ll walk you through how to maximize your tax deductions as a Turo host, so you can keep more of what you earn and put that extra money to better use.

Let’s break it down so you can zoom through tax season with ease.

1. Mileage vs. Actual Expenses: Choosing the Right Path

When it comes to deducting expenses for your car, you have two primary options: the standard mileage deduction or the actual expenses deduction.

It’s like choosing between a Tesla or a Mustang for your road trip. Both are great, but one might suit your situation better.

Option 1: The Standard Mileage Deduction

The standard mileage deduction is a simpler approach that allows you to deduct a flat rate per mile that your car was used for business purposes. In 2023, the IRS set the mileage rate at 65.5 cents per mile. This rate covers not only the fuel but also maintenance, insurance, depreciation, and other vehicle-related costs.

Let’s say your car racks up 10,000 miles this year as part of your Turo business. With the mileage rate, you could deduct $6,550 from your taxable income just by tracking your miles. Keep in mind, however, that you need to maintain a log of business miles (those driven specifically for your Turo rentals) to ensure that you’re accurately reporting the deduction.

Option 2: The Actual Expenses Deduction

If your vehicle expenses are higher than what the mileage deduction covers, you might benefit more from using the actual expenses method. This option allows you to deduct a percentage of all the costs associated with operating your car for Turo—fuel, maintenance, repairs, insurance, registration fees, and more.

To use this method, you’ll need to calculate the portion of your vehicle’s expenses that apply to your Turo business. For example, if you use your car 60% of the time for personal use and 40% of the time for Turo, then you can deduct 40% of your actual expenses. While this method requires more detailed record-keeping, it may offer greater savings if your vehicle has high operating costs.

2. Depreciation: The Hidden Savings

Depreciation is another major deduction that can provide significant savings, especially if your car is relatively new. Over time, vehicles naturally lose value due to wear and tear, and the IRS allows you to deduct this decline in value as a business expense.

The deduction can be substantial if you’re renting out a high-value car. However, it’s important to note that depreciation deductions vary based on the year the vehicle was placed in service, the type of vehicle, and the method you use for depreciation.

For most passenger cars, the IRS has specific caps on how much depreciation you can deduct each year, but the savings can still add up over time.

If you’ve purchased a car specifically for your Turo business, consider the Section 179 deduction, which allows you to deduct a large portion of the car’s purchase price in the first year, up to certain limits.

3. Repairs and Maintenance: Keep Your Car in Top Shape—and Your Wallet, Too

Oil changes, new tires, brake pads—taking care of your car isn’t just good for business, it’s good for your taxes too. Any maintenance or repairs related to your Turo business are deductible. So go ahead, pamper your car; it deserves it (and so does your tax return).

More substantial repairs, such as engine work or body damage, also count as deductible expenses, as long as they’re related to your Turo business. Keeping your car in good condition not only ensures a better experience for renters but also ensures you’re capturing the full value of your tax deductions.

Just make sure to keep detailed records of these expenses. Even minor repairs like replacing windshield wipers can add up over the year, so it’s important to track everything.

4. Insurance Premiums: Covering Your Car and Saving on Taxes

Let’s face it, car insurance is like that unwanted extra snack you didn’t order—necessary, but not exactly the star of the show. Luckily, if you’re using your car for Turo, your insurance premiums become partially deductible!

Whether you’re using Turo’s built-in insurance or your personal auto insurance, the portion that applies to your business usage is deductible. Just like with the actual expenses method, you’ll need to determine what percentage of your driving is business-related and deduct accordingly.

It’s also worth noting that if you have a fleet of cars, each vehicle’s insurance premiums are deductible individually, further maximizing your savings.

5. Other Operating Expenses: Parking, Tolls, and More

In addition to the big-ticket items like repairs and insurance, don’t forget to deduct other operating expenses that may crop up during the course of your Turo rentals. Parking fees, tolls, and car washes all qualify as business expenses when they relate to your rental activity.

Let’s say you need to park your car in a lot between rentals, or your renter incurs tolls during their trip—these are expenses that can be deducted from your taxes. Even incidental costs like keeping your car clean for the next rental can be written off as a business expense.

While these might seem like small deductions on their own, they can add up over the course of a year, helping to reduce your taxable income.

6. Tax Help: Navigating the Maze

Let’s be real, Turo tax deductions can feel like navigating a roundabout—endless circles with no clear exit. That’s where professionals like Monily come in. We’ll take your Turo bookkeeping stress for a spin and make sure you don’t miss a single deduction (even the weird ones you didn’t know existed). Consider us your personal tax GPS!

With professional guidance, you can avoid common tax pitfalls, optimize your deductions, and make sure you’re fully compliant with the IRS—all while keeping more of your hard-earned income.

The Road to Bigger Tax Savings

As a Turo host, maximizing your tax deductions is key to keeping more of your profits. Whether you’re driving down the mileage deduction route or calculating actual expenses, there are numerous ways to reduce your tax bill. From depreciation to parking fees, every expense counts when it comes to tax season.

So, keep good records, track your business miles, and don’t be afraid to ask for professional help when you need it. By understanding the deductions available to you, you can save more money and reinvest it into growing your Turo business.

Tax season doesn’t have to be a stressful time—it’s just another opportunity to make your Turo venture more profitable!

FAQs

Q1: What’s the difference between the mileage deduction and actual expenses?

A: Think of it like a road trip: the mileage deduction is the scenic route—simple, flat, and all-inclusive. You just track your miles and multiply them by the IRS rate. The actual expenses route? That’s the off-road adventure where you count every single expense from gas to car washes. If your car is high-maintenance, the second option might give you more savings, but you’ll need to keep a few extra records along the way.

Q2: Can I really deduct car washes?

A: Yes! Every time you give your car a bubble bath to get it rental-ready, that’s a business expense. Whether it’s a quick rinse or the deluxe wash with the rainbow soap, it counts. Just keep those receipts clean!

Q3: What if I drive my car for both personal use and Turo?

A: Great question! If your car moonlights as your personal vehicle, no worries. You’ll just need to keep track of how much time it’s used for business. For example, if you use your car for Turo 40% of the time, you can deduct 40% of your actual expenses (or mileage, depending on which route you choose).

Q4: What’s depreciation, and why should I care?

A: Depreciation is like the gradual aging process of your car—every mile it drives, it loses a little value. The good news? You can deduct that loss on your taxes. Think of it like giving your car’s value a farewell party and getting tax benefits in return!

Q5: Do I need to keep ALL my receipts?

A: Yes, but don’t panic! While it might seem like overkill, keeping your receipts helps you claim every possible deduction. Whether it’s for gas, repairs, insurance, or parking, the more records you have, the more you can deduct.

Pro tip: snap a pic of your receipts and store them digitally. Your glovebox will thank you.

Q6: Can I deduct my Turo insurance?

A: Absolutely! Whether you’re using Turo’s insurance or your own, the portion of your insurance that covers your rental business is deductible. Your car is insured and your wallet is a little heavier—what’s not to love?

Q7: How can Monily help me with all this?

A: We thought you’d never ask!

Monily can handle all the number crunching and paperwork so you can focus on growing your Turo business. From helping you track expenses to ensuring you get every last deduction, we’ve got your back.

We’re like the co-pilot on your tax-saving journey—minus the bad road trip music.

Q8: What if I’m just terrible at keeping records?

A: You’re not alone! Many people find record-keeping a bit daunting. That’s where apps or accounting services like Monily come in handy. They can help automate your expense tracking and ensure you don’t miss out on any savings.

No more panicking during tax season—just smooth, worry-free cruising!

Wajiha Danish

Wajiha Danish is the Director at Monily, overseeing financial strategies and operations for small and medium businesses. She has over 18 years of experience, including her role as Controller at HOCHTIEF PPP Solutions North America. Wajiha's background includes significant roles at Pakistan Petroleum Limited and A.F. Ferguson & Co. (PwC Pakistan). She is a Chartered Certified Accountant (ACCA) and Certified General Accountant (CGA) with expertise in financial management and project finance.