Now is a good time to start thinking about your taxes, especially if you are self-employed. It really is never too early to start planning for taxes. The most well-thought tax planning strategies typically yield the biggest tax savings. As a Turo fleet owner, or if you operate a business in the Sharing Economy you are considered self-employed. This changes things a little bit when it comes to your tax situation, which can lead to confusion and mistakes. Here are some tax help topics for Turo fleet owners.
Taxes for Turo Fleet Owners
The income you earn as a Turo fleet owner is subject to tax just like any other income you may earn. The way you remit your taxes changes a bit because an employer isn’t withholding and remitting taxes on your behalf. There are a couple of things you need to consider as a Turo fleet owner:
- Do I need to pay estimated taxes? – Estimated taxes are due if you expect to owe more than $1,000 in taxes. These are due quarterly and can be paid online.
- Do I owe self-employed taxes? Self-employed taxes make up your portion and employer portion of social security and medicare taxes in the amount of 15.3%.
- What expenses are tax-deductible? There are many ongoing business expenses that can qualify as deductible expenses. These help lower your tax burden.
- Do I need to collect and remit sales tax on my earnings? Sales tax varies from state to state and city to city. It is important to research the specific sales tax regulations in the areas you conduct business. If you live in an area that levies a sales tax on car rentals, you will need to collect sales tax and remit it. Talk to a State and Local Tax (SALT) expert for more information.
It is important to seek tax help when it comes to these situations. Failure to comply with the tax laws that apply to you can result in penalties and fines.
Tax on Rental Income
The tax rate you are taxed at will depend on your tax bracket. There are currently 7 tax brackets ranging from 10% to 37%. The greater your taxable income, the larger your tax rate will be. Your tax bracket is based on your taxable income, and not your gross income. Your taxable income includes all sources of income (both W2 and 1099), minus adjustments and deductions.
Building a Turo Fleet
When business is booming, many Turo owners scale their business, encompassing multiple cars, and before you know it, they have a full Turo fleet. When looking to grow a business, there are certain expenses associated with growth that can be tax-deductible. For example, if you purchase a new vehicle to add to your fleet, the cost of acquiring a new vehicle can be depreciated over the course of its useful life (usually 5 years). This helps lower your tax burden. You can learn more about depreciation here.
Common Deductions for Fleet Owners
Tax deductions are a great way to lower your tax liability. Tax deductions are made up of ongoing business expenses that are considered ordinary and necessary to your business. Some common tax deductions for Turo fleet owners include:
- Depreciation – You can depreciate the cost of your vehicle over the course of its useful life. This spreads out the tax benefits, instead of taking them all at once.
- Insurance. You must have car insurance in order to legally operate your vehicle. If you rent your vehicle Turo or Getaround, you might need additional coverage. You can deduct your insurance costs as a business expense.
- Maintenance – You can deduct the cost of keeping your vehicle safe and maintained.
- Marketing – Did you pay a professional photographer to take pictures of your car so it’s more attractive to rent? These types of expenses are tax-deductible.
- Parking – Do you have to pay to house your vehicle?
- Registration – Annual vehicle registration expenses are deductible.
- Repairs – Did you have to have any repairs done on your vehicle?
- Service fees – Service fees that Turo charges you to advertise on their app are deductible.
Some other deductions that may apply include:
- IRA contributions – If you are putting away money for your retirement in an IRA you can deduct up to the maximum contribution limit. FOr the 2019 tax year, that limit was $6,000. You have until April 15th to make contributions for the previous year. SO if you are looking for some additional tax deductions, this is a good one.
- Self-employed taxes – You can deduct half of your self-employed taxes (the employer portion) as a deductible expense.
More Turo Tax Help
An important step in running a business is knowing when to ask for tax help. The more complicated your tax situation gets, the better off you are working with a tax advisor. Understanding all of the tax laws that apply to your business is a full-time job in and of itself. This amplifies, the more locations you conduct business in. For example, your business could owe sales tax depending on where it operates. As we mentioned above, sales tax varies from state to state and city to city. Some states are origin tax based, meaning you collect sales tax based on your business’s locations, and some are destination tax based, meaning you collect tax based on where your clients are located. And some states like California, are both origin and destination-based.
A tax advisor who specializes in your type of business can be very valuable to your business operations. Not only can they help you with compliance issues, but they also ensure that your taxes are prepared accurately and on time. In addition, collaborating with your tax advisor outside or tax preparation time can really be beneficial to your business by forming a tax planning strategy. Your taxes don’t just occur once a year, being ever mindful of your taxes throughout the year so that you can time purchases and plan for deductions is crucial to saving money come tax time. Schedule a strategy session with one of the tax experts at Shared Economy today. For more Turo tax help subscribe to our newsletter today!