Establishing a legal business entity, such as an LLC or a corporation, protects you from being held personally liable if your car rental company is sued. 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. The revenue generators of Freddy's Fine Car Rentals will be the commissions earned when a customer rents a vehicle. According to the Internal Revenue Service, the main purpose of the rental car should be business.
Your car rental company can make money if it has an optimal location, a diverse fleet of vehicles, and competitive rates. 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. A car rental company earns money by renting cars to those who need a means of transportation while they are away from home, to embark on a trip, or as a substitute for a vehicle that is being repaired. Finally, determine if your car rental activity is conducted for profit if your rental activity is not a business.
The growth potential of your car rental business depends on location, the quality of your fleet and your marketing knowledge. When your personal and business accounts are mixed up, your personal assets (your house, car, and other valuables) are at risk if your business is sued. This is how companies create business credit to be able to apply for credit cards and other lines of credit. However, we can provide some guidance on what category of expenses is most suitable for rental vehicles.
The typical owner of a rental car business spends time researching new vehicles, making decisions about their fleet of vehicles, making marketing decisions, delegating work tasks to employees, and establishing partnerships with local companies. Report your gross rental income on Schedule C and then deduct on that form all expenses that are directly related to your car rental business. The tax deduction for a rental car depends on whether you are self-employed and how much profit or loss you have earned when renting a car. However, you can ask the IRS not to determine if your car rental activity is conducted for profit.