Car Rental

Why Should Car Rental Hosts Record Mileage?

Keeping records of mileage is an important part of maximizing your tax savings as a P2P car rental host. By keeping accurate records of your mileage, you can effectively reduce your taxable income and save money on your taxes.

You can decide to deduct either your actual expenses (fuel, repairs, maintenance, and depreciation) or your standard mileage rate, which is a set amount for each business mile driven. As of January 2023, the standard mileage rate for business use of a vehicle is 65.6 cents per mile.

Note that the IRS expects car rental hosts to keep a log of all the miles you drive for business purposes. This includes the date, destination, purpose of the trip, and starting and ending odometer readings.

Does My Rental Car Have A Mileage Limit?

Depending on your car rental location, most peer-to-peer rental sites offer one of two mileage rates: limited and unlimited mileage rates. The policy you receive depends on the car rental company, duration, and location of your car hire.

If your rented car has a mileage limit, it means you can’t drive beyond the miles you paid for. Else you’d be charged extra fees. Before you pick up the car, ask the counter staff if there are any limits.

Also, the price per extra mile varies, depending on your supplier. But generally, it could cost $0.19/km to $0.81/km. Lastly, weigh your options. Choose what policy would suit your journey best and what rental before

So which policy suits your journey best?

Car Rental Tax Collection And Remittance

As with any car rental contract, car rentals are subject to many layers of taxes and fees. These taxes make up a large portion of the bills.

These fees could be charged by car rental firms to salvage certain costs such as charges for gas, insurance, and probably a quick fix. As a peer-to-peer service provider, you must collect and remit your rental tax and surcharges for all car rental services that are for 31 days or less.

Again, there are car rental taxes for several purposes and each tax is levied on the receipt earned by the rental company, which in turn, is passed on to the consumers. And because these taxes vary by location, it affects car rental fees as well.

Does My Insurance Exist For Peer-to-peer Car Rental?

As a car renter, you may need a personal auto insurance policy to rent your car on a peer-to-peer car rental site. However, you’ll have to check your policy as insurance terms vary with each site.

To host, car owners are required to fulfill the state minimum coverage requirements and select a protection plan, which may include third-party liability insurance. But know that the minimum amount of insurance coverage required varies by location.

However, you may have to check your insurance policy as the terms vary. Many car insurance companies may explicitly state that it doesn’t cover vehicles maintained, operated, or used as a personal vehicle shared program.

So your insurance may exist for a peer-to-peer car rental, but you’ll have to fully understand what your policy will and will not cover if you join a personal vehicle shared scheme.

Peer-to-Peer Car Rental Tax Tips

Tax payments are non-negotiables when you run a business. As a P2P car rental host, you’re considered a small business owner for tax reporting purposes. Here are a few P2P car rental tax tips that could help.

  • Declare your cash: The car-sharing company you use may send you a form after the tax year ends. They’ll also report your income to the IRS. As a car rental host, if you do not receive any form from your car-sharing company, do well to report to the IRS the total income you earned.
  • Tally your taxable income: Whether or not your taxable income is reported to you on a 1099 Form, subtract your total deductions from the amount you earned through car sharing. For example, if you earned $8,000 for the year and have $2,500 in deductions, your taxable income would be what’s left of your self-employment income. $8,000 – $2,500 = $5,500 (taxable income)
  • Don’t let your taxes accumulate: As a car-share driver, it can be overwhelming to get a large tax bill at tax time. To avoid this situation you can pay-as-you-go. Use Form 1040-ES to figure out and pay your estimated tax to the IRS every quarter.

Vehicle Protection for Car Rental Hosts

As a car rental host, the need for vehicle protection can not be over-emphasized. Most car rental companies offer protection plans for third-party insurance. This vehicle protection policy covers car damage and theft.

Car rental hosts are responsible for a certain deductible amount either monthly, quarterly, or yearly. This amount will be taken by your car rental company who in turn ensures protection for your car.

Additionally, it’s important to note that these vehicle protection plans vary. Plus the level of protection your vehicle receives varies with the plan you choose.

Lastly, before you register with a rental company, ensure you check with their vehicle protection plan to ensure you’re comfortable with each terms and conditions applied.

10 Best Write-Offs for Every Car Rental Provider

As a car rental provider, you provide such relief to travelers and people who need urgent transport means. But what is in there for you, especially as it concerns taxes?

We’ll spill the beans! Here are the 10 best write-offs any car rental provider can leverage.

1. Car purchase & depreciation

If you purchase a new car, you can write off part of the cost every year for five years.

2. Parking fees

Parking to catch up with an old friend downtown? Or parking your car at a pickup location for renters? It’s tax-deductible!

3. Auto insurance

You can deduct the car insurance monthly fees or premiums on cars you rent out.

4. Vehicle registration

State registration fees for the vehicles you rent out can be written off.

5. Vehicle tool kit

Some tools, such as duct tape, tire iron, flashlights, and other tools are deductible.

6. Repairs & maintenance

The cost of your car repairs and scheduled maintenance are all write-offs.

7. Business meals

If you discuss work with a coworker, mentor, client, or prospective client, it’s a write-off!

8. Travel lodging

When you travel for work, lodging expenses such as Airbnb or hotel rooms can be written off.

9. Property repairs

You can write off up to $2,500 for individual repairs to your property if you work from home.

10. Property insurance

Another clean deal for people who work from their homes! Whether it’s rental or homeowners insurance, you can write off a portion through your home office deduction.

How to Report Car Rental Income and Deductions

If you’ve been in the car-renting space for a while, you should have known that the money earned from renting your car on peer-to-peer car rental platforms is taxable. The good news, however, is that you can deduct depreciation and other related expenses. Here are some IRS rules regarding  car rental income and deductions;

IRS Rules for Reporting car rental income

The IRS classifies income from car renting as ‘rents from personal property.’ And this income is subject to federal and state income tax, and in some cases, self-employment tax.

The latter applies to business income and is reported on Schedule C. Nonbusiness income is reported on Schedule 1 and Line 8 of Form 1040.

IRS Rules for Reporting Car Rental Deductions

You qualify for a car rental deduction only if you’re self-employed. Your deductions are netted against your business income on Schedule C.

Nonbusiness expenses are considered hobby expenses; expenses from something you do for pleasure without expecting profit from it. Generally, car rental deductions covers;

  • Depreciation
  • Interest
  • Marketing expenses
  • Expenses for car rental use
  • Car washes
  • Repairs