Car rental expenses can only be deducted if you are self-employed. They are deducted directly from your company's revenues in Schedule C. Legitimate unreimbursed business expenses are deductible items according to the guidelines established by the Internal Revenue Service. The IRS considers car rental expenses as travel expenses.
You can generally declare such expenses as business expenses if the trip meets all of the IRS requirements. The main requirements relate to the purpose of the trip and the distance traveled. People who own a business or are self-employed and use their vehicle for business can deduct car expenses on their tax return. If a taxpayer uses the car for business and personal purposes, the expenses must be divided.
The deduction is based on the part of the mileage used for business. A common misconception associated with tax forgiveness and renting a car for business is that the deduction is only available when renting a car for travel and is used out of town. The benefits associated with renting a car for your business include the ability to deduct all of the rental rates for the year in which they were spent, according to the IRS. If the rental vehicle is used for personal purposes, the percentage of the cost of the rental car associated with personal use must be subtracted from the amount used as a tax deduction.
However, you can only deduct car expenses if your rental activity qualifies as a business or investment for tax purposes. If you combine business with pleasure, you can only deduct work-related car rental costs. Among the other features associated with renting a car for your company, is that the money you spend on fuel is deductible, as long as the vehicle is used for business purposes. Even if you rent in the community where the business is located, you can cancel the car rental costs associated with a business purpose or objective, according to the IRS.
However, we can provide some guidance on what category of expenses is most suitable for rental vehicles. Instead of using the standard mileage rate, you can deduct the actual cost of using your car for your rental activity. Even if a trip from home has a business purpose, such as transporting tools or supplies from the house to your rental property, it's considered a daily trip and isn't deductible. According to the Internal Revenue Service, the main purpose of the rental car should be business.
Thus, for example, you can count as business miles a car trip that your employee, spouse, or child takes to deliver an item for your rental business or for any other business purpose. Investors don't usually drive much to or from their rental properties or for other business purposes because (by definition) they are not actively involved in the management of their rental properties. The cost of traveling by car or other vehicle is deductible in the year in which it was incurred as an operating expense, provided that the trip was normal and necessary for your rental activity, that is, common, useful and appropriate for your activity. Once you arrive at your rental office or rental property, you can deduct trips to other locations related to rent.