Question 1

What are some deductions I may be able to take advantage of when sharing my car on Getaround?

Accepted Answer

The standard mileage deduction allows vehicle owners to earn deductions for every mile driven for business purposes. For Getaround users, this can include the miles your vehicle accrues from carsharing. The standard mileage deduction varies year by year, so you should check the IRS website for the most up-to-date rates.

Please note, you should maintain a mileage log that tracks each business mile driven for tax purposes. It should include the beginning mileage, ending mileage, and a few notes on the trip explaining its business purpose. Keep your old logs on file with your other records from past tax years, and start a new log every time a new tax year rolls around. Proper record-keeping ensures you can verify your claims if the IRS has any questions.

Question 2

Should I treat all money sent to me as income, or are some adjustments (like fuel reimbursements or reimbursements for damage repairs) not considered income?

Accepted Answer

Generally, all income is taxable, but certain types of reimbursements aren’t typically considered income. For example, certain types of insurance reimbursements aren’t taxed as income because they offset a loss somewhere else. However, fuel reimbursements may be considered income that offsets your actual fuel expenses.

This IRS notice explains the criteria in more detail. Consult with your tax advisor for more detailed information on specific cases.

Question 3

Do I have to make estimated tax payments for my Getaround income?

Accepted Answer

If you expect to owe more than $1,000 in taxes from your carsharing income, the IRS expects you to make quarterly payments towards your taxes. Estimated tax payments are due every quarter, and your payments will be applied to your year-end tax bill.

W2 wage-earners can also elect to increase federal withholdings on their paycheck to cover the expected cost of self-employment taxes. If you have a job where you receive a regular paycheck, you can avoid the hassle of making estimated tax payments using this approach. However, it’s not a free lunch. The additional withholdings will be deducted from your take-home pay, and your paycheck will be smaller as a result. It might be more convenient, but it doesn’t provide any savings benefit. Talk with your tax advisor for more detailed guidance.

Question 4

How long should I keep receipts and mileage records?

Accepted Answer

The IRS has up to five years to audit tax returns, and the best practice is to keep all your records for at least as long a time. If the IRS audits your return from four years ago, they’ll expect you to produce all the documentation necessary to prove your claimed income, deductions, and credits are legitimate.

If you can’t produce this information, you put yourself at risk of fines, penalties, or worse. Stay organized and keep your business records on file for at least five years to ensure you won’t end up on Uncle Sam’s bad side.

Question 5

Which is the best method for calculating vehicle-related expenses? (standard mileage vs itemized breakdown)

Accepted Answer

Using the standard mileage deduction is the easiest way to claim deductions for your vehicle. However, it might not be the most valuable method for claiming vehicle-related deductions. Depending on your expenses and driving habits, you might find that itemizing your expenses gives you a larger deduction.

In order to use this method, you have to determine what percentage of your vehicle use is business-related and then apply that ratio to your overall vehicle expenses. For example, a vehicle used for business purposes 50% of the time that generated $10,000 worth of expenses would qualify for a $5,000 itemized deduction.

If your vehicle is primarily used for business purposes, this could be a better alternative than the standard mileage deduction. However, you have to maintain records for every vehicle-related expense and track your mileage to support your claimed expenses in the event of an IRS inquiry.

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