Paying taxes on Car Share Income: Turo and GetAround
Welcome back, readers! Today’s article will be a guest post from SharedEconomyCPA. These guys are the real deal and focus only on shared economy businesses so if you’re looking for an accountant be sure to check them out (and let them know Jerry from SharingEconomySecrets sent you to receive $20 off!)
Before I let Sean take over, I want to stress the importance of correctly filing your taxes. I feel so strongly about this issue that I have included it in the Sharing Economy Secrets 3 Pillars of car sharing success.
- Buying your rental fleet at the right price
- Reducing your overall tax obligation
- Scaling your business correctly
Each one of these points will have a significant implication on your business’s overall profitability and making sure you set the foundation correctly will directly impact your business in the long term (and avoid unnecessary headaches with Uncle Sam).
That being said, I’m not a tax professional, and that is why I have reached out to a CPA firm that focuses solely on sharing economy business owners. I hope they can clarify some nagging questions you may have.
Take it away Sean!
Two things guaranteed in life: Death and Taxes
If you use car rental platforms to earn income from renting vehicles, you’re probably wondering how it will affect your taxes. In general, the income derived from using car rental platforms is taxable.
How you will report this income depends on whether your operation is considered a business. If your primary goal is to generate revenue and you rent your vehicles on these platforms regularly, then your rental activity will likely be regarded as a business.
Since you will incur regular monthly income and expenses from using these platforms, you should understand how to minimize your taxes, avoid late fees and penalties, and ensure that your returns are filed correctly and on-time. To help you get started, here are the most important things to know about paying taxes on car rental income from Turo, Getaround, and other car rental applications.
What All Turo & Getaround Hosts Need To Know About Taxes
Given that most car rental activity fits the definition of a business, your income and expenses will be reported on Schedule C (Profit or Loss From Business). You can always verify your car rental income by checking your earnings in your car rental platform accounts.
SharingEconomySecrets Tip: If you have any manual adjustments on your account be sure to double check! I’ve had a customer support agent short me hundreds of dollars. It’s your responsibility to make sure you are receiving every dollar you earn.
The total amount that you earned is what you will include as income on your Schedule C. As a Schedule C filer, your earnings will also be subject to self-employment taxes, including Social Security and Medicare taxes.
When will I need to file my car share earnings?
If you owe income tax on your car rental earnings because you have earned more than $1,000 for the year when this income is combined with your other sources of income, you are also required to make estimated tax payments. Estimated tax payments are made three times during the current tax year with the final tax payment due in January of the following year.
In addition to income taxes, Getaround and Turo bookings may be subject to state and local taxes. Currently, Turo collects and remit sales tax on your behalf if you rent your vehicles in for trips in Maryland. However, users are responsible for determining if they owe sales tax in other jurisdictions.
Do I Get A 1099 From Turo & Getaround?
What a nice problem to have!
Unless you earn more than $20,000 and complete more than 200 transactions for the year on both Getaround and Turo, you will not receive a Form 1099-K from these platforms. As a result, you’ll need to make sure that you calculate your earnings accurately from these platforms.
Always keep track of your earnings from Turo and Getaround regardless of whether you receive a Form 1099-K so that you can reconcile your earnings against what is reported on the form. This will allow you to catch an errors so that your income is not incorrectly reported to the IRS.
Check your registered email to see if you received a nice congratulations email like this one:
What Kind Of Rental Expenses Can Be Deducted?
Your car rental tax deductions will largely be auto expenses. Expenses include insurance, repairs, maintenance, registration and licensing fees, depreciation if you own the vehicle, and finally lease payments if you are leasing the vehicle. These expenses are considered allocable expenses, which means that you are only permitted to deduct these expenses according to the percentage of time that that vehicle was used for business.
Other potential deductions are considered as non-allocable expenses, which means that you will be allowed to deduct 100% of those expenses. Expenses that you can claim a 100% deduction for include parking fees, car washes, and cleaning fees.
Making Booking fees less of a nuisance
You are also permitted to deduct the booking fee charged by the car rental platform. For Getaround, this fee is 3% of the trip price ($1.00 minimum). Turo charges a trip fee which is a variable percentage of up to 25% of the trip price.
Do you feel like a Tax professional yet?
We hope that you have enjoyed this article on tax obligations arising from car sharing activities. If you’re like me and tax season gives you the WORST migraine, checking out SharedEconomyCPA might be a good decision.
Experienced tax professionals like them can even pay for themselves! Not only do you get to deduct their fees, you might reduce your taxes owed by taking advantage of every opportunity afforded to you.
Thank you for taking the time to read this article and as always, don’t hesitate to drop a comment below if you have any questions or comments.