Partnering with Turo in the car-sharing industry is a lucrative venture. According to Statista, the industry's revenue is anticipated to reach US$12,947 million in 2022. While you can make great returns from this business model, you also have to be conscious of taxes.
This is especially necessary when you operate in the US and Canada. According to the USAgov, most of the country's federal income tax returns are due on April 18, 2022. However, if you're from Maine or Massachusetts, you have up to April 19, 2022.
However, filing Federal and State taxes as a Turo host and 1099 contractor can be daunting for first-timers. So, you want to be a little careful to avoid making rookie mistakes. This comprehensive tax guide will show you how to best handle your Turo business taxes.
You Will Likely Owe the IRS Money
According to IRS, income generated from renting your car falls under the category "rent from personal property." Also, the IRS may consider you as a small business, making it mandatory to file Federal taxes when you meet or surpass income levels. But first, you need to have all your Turo income for the tax period consolidated for quick access.
Turo Will Send You a 1099k
According to Turo's terms of service, you'll receive form 1099k for reporting how much income you earned monthly for the tax period. However, this is subject to limitations. First, you need to have earned more than $20,000, and two, you must have made over 200 trips. You may not receive the 1099k form if you don't meet these criteria.
Though you don't meet the criteria, you still have to file your Turo taxes. This is where top-notch bookkeeping skills come to the rescue. So, you need to get it right off the bat in case Turo doesn't send you the form 1099k. Lastly, you should report your earnings for the tax period on schedule C. This applies to sole-proprietors and single-member LLCs.
Save a Lot of Money by Claiming Expenses as Tax Write-Offs
You can deduct all expenses provided you can prove they're business-related. You, therefore, want to keep your receipts safely for a moment like this. That being said, your net profit equals total income minus expenses. This is also your taxable income.
The sure way to keep more profits is to have a smaller taxable income. You can best achieve this by legally taking deductions. So, what deductions can you take from your Turo business? Let's dive into that!
An office is essential for all businesses, whether a start-up or an already established business. The best part is that a car-share business like Turo is flexible, so you can have a home office or one at a business center.
Overall, your choice of office will depend on your scale and personal preference. That said, office operations are deductible business expenses. This includes overheads like rent, stationery, furniture, computers, and utilities, to mention a few.
There are plenty of car expenses you can deduct from your gross income. A typical one includes maintenance costs, which may involve oil changes and parts repairs. You can also consider the relevant city or state registration fees. Lastly, don't forget to deduct lease fees if you operate the car on lease.
You can have a team of support staff depending on how big or small your business is. Of course, this is optional and may only apply if you want the business passive. This way, you can enjoy the fruits of running the business without putting in a lot of effort. So, if you already have employees, it's possible to deduct their wages. Payroll costs are also deductible.
Car insurance is a necessity in the car-sharing industry. If you're going to rent out your car to strangers, it makes sense to protect it from unexpected damages. The car can be destroyed intentionally and unintentionally. The only way to mitigate the risk is to insure it. The good news is you can deduct car insurance from your gross income when working out your taxable amount.
Turo is a business, and it should also make profits. Otherwise, they may have to close it down. So, they'll charge you some fee to stay in business. Typical Turo fees include vehicle misrepresentation, host trip cancellation, host no-show, and cleaning violations fees. While these may seem unfair, you don't have to stress over them because you can write them off.
Turo may not be proactive in marketing your Turo hosting business. However, that doesn't mean you also sit and hope customers will come your way. Instead, you want to be more proactive by marketing your business far and beyond.
You can run ads on social media or car rental directories. The best part is all marketing and advertising costs are deductible. So, if you haven't considered writing them off before, this would be the time to start.
There are more business deductions like depreciation that you can write off. However, the above will suffice for this guide! Most importantly, you want to consult tax experts like CPAs to advise you on how to handle your Turo host taxes.
File Your Taxes Online to Save Time and Money
There are three ways to file your Turo host taxes. One, you can fill out IRS form 1040 or 1040-SR then send it by mail. Two, you can file your taxes online using tax software to save time and money, and three, you can hire a professional tax preparer.
Filing your taxes by yourself can be a hassle, whether online or mailing IRS form 1040. The process is tedious, and you're likely to make costly rookie mistakes if it's your first time.
Hiring a tax preparer will be your best shot if you don't want the hassle! The best part is, you can still find one online through services like H&R Block and TurboTax. Though they're a little costly, it's worth it in the long run.