Platforms like Turo and Airbnb offer people a way to earn money using property they already have. With Turo, a vehicle that sits idle most of the year can now be used as a lucrative side hustle.
It doesn't matter whether you rent your car out full-time, or just a few times a year for a little extra money. Congrats! You’re now technically the owner of a car rental company.
This prospect might feel overwhelming, especially when tax time rolls around. But this guide is here to make your Turo taxes a smooth ride.
Do you pay taxes on Turo income?
Yes. If you’re a Turo host, the IRS will expect you to file self-employment taxes, as long as you “materially participated” in your own car rental business. That applies to basically all Turo hosts, as long as they’re the only person involved in renting out their car (other than, potentially, their spouse).
If that confirmation was all you needed, you can skip ahead, to the section that breaks down the types of Turo taxes you’ll pay. You can also read on for more info on material participation.
What does material participation mean for Turo hosts?
With a peer-to-peer car-sharing program like Turo, you're earning money by renting out your personal property. That means it’s technically possible for your rental income to be treated as “passive.”
Getting this passive treatment would mean no self-employment taxes, but also no business write-offs (which we’ll talk about later).
The opposite of passive is “materially participating.” It’s how the IRS describes business activity that’s “regular, continuous, and substantial.”
Do most Turo hosts “materially participate” in their car rental activities?
Yes, Turo hosts should count as materially participating, as long as they’re the only person involved in renting out their car. (Their spouse can be involved too.)
One of the tests for material participation in a business is if the work you’re doing is more or less all the work being done for that business. As long as that’s the case, self-employment taxes and write-offs are both on the table.
What taxes do you pay on Turo income?
As a sole proprietor, you’re responsible for paying these taxes:
- Self-employment tax
- Federal and state income taxes (depending on your state)
Let’s take a look at each.
This is also known as “FICA tax,” which stands for the Federal Insurance Contributions Act. FICA taxes help fund Medicare and Social Security programs. All workers in the US pay them, but they work a little differently for self-employed people versus W-2 employees.
For traditional employees, their employers deduct 7.65% of their paychecks for FICA taxes. Then, they have to match the same amount, for a total of 15.3%
Self-employed people, on the other hand, are on the hook for the full 15.3%. (You’re paying both the employee and employer portions.)
Luckily, you can write off the employer portion of your FICA tax on your income taxes. Let’s talk about those next.
Federal and state tax income taxes
Depending on your income bracket, your federal tax rate can range from 10% to 37%. Get a sense of how much you’ll owe with our income tax calculator.
Your state tax rate depends on where you live. Some states have a flat tax rate that everyone pays. Others have a progressive rate that — like federal tax — goes up with your income level.
Several states don’t charge income tax at all! These are:
- South Dakota
Now that you know the taxes you’re responsible for paying, let’s cover the Turo tax forms you should look out for.
What Turo tax documents will you get at tax time?
Turo will send you a tax form called a 1099. These forms go out to independent contractors at tax time, and they detail the amount of money you earned from a platform or client.
If you’ve worked as an employee, know that 1099s are similar to the W-2s you got documenting your annual wages. With both forms, you get a copy, and the IRS gets a copy too.
To receive a 1099 from Turo, you’ll have to meet some criteria.
Who will get a 1099 from Turo in 2022?
In general, Turo will send out 1099s to hosts who:
- Earned at least $20,000 in gross annual sales, from at least 200 rentals
- Live in the US
- Submit their tax information (like their Tax Identification Number) by the deadline (which was January 15th in 2022)
In some states, though, you don’t have to earn as much — or rent out your car 200 times.
What type of 1099 form will you get from Turo?
“Turo only issues 1099-Ks,” Corporate Communications Manager Carmen Soh confirmed over email.
1099-K rules have changed recently. If you’d like to know more about this switch-up, read on. Otherwise, feel free to skip ahead to the section on downloading your 1099 form.
What the IRS’s 1099-K rule changes mean for Turo hosts
Originally, all Turo hosts were originally set to get 1099-Ks as long as they earned at least $600 from the platform. This was based on a new set of IRS rules that were supposed to kick in for your 2022 taxes. But the IRS ultimately decided, in late December, to delay enforcing these rules until you deal with your 2023 taxes in 2024.
Thanks to the delay, the threshold for getting a 1099-K shot up from $600 to $20,000 — plus an additional requirement that these payments be split across 200 or more transactions.
(If you’ve been self-employed for a while, you probably recognize these numbers. These are the pre-2022 1099-K thresholds — the IRS is essentially just rolling things back!)
Turo covers this delay on their blog. Bottom line: The platform no longer has to provide 1099-Ks to a lot of their hosts.
How do you access your Turo 1099?
According to their website, Turo makes 1099s available by January 31st. You won’t get an email from the platform — you’ll have to log in to grab your form.
Turo confirmed that you can access your form by taking the following steps :
- Log in and open the “Host” menu
- Select the “Business” tab
- Click the “Tax information” link under “Resources”
- Scroll down to “1099-K tax form”
Et voilà! The form should be waiting for you.
What to do if you don’t receive a 1099 from Turo
Turo isn’t responsible for sending you a 1099 if you earned less than $20,000 in most states. But you’re still responsible for reporting any income you earned through the platform.
Here’s how you can find your Turo income summary if you don’t qualify for a 1099 (or if, for some reason, you can’t get yours):
- Log in and open the “Host” menu
- Select the “Business” tab
- Click the “Tax information” link under Resources
Now let’s turn our attention to saving as much of those earnings as possible.
How to save money with Turo tax deductions
From the cost of your computer to cleaning supplies for your car, there are likely many expenses your car rental business can’t go without. Luckily, these business expenses are tax-deductible.
Think of your deductions as a shield for your income. Let’s say you earned a total of $10,000 from Turo, but racked up $1,000 in expenses.
You can write off the $1,000 from your gross income. That brings your taxable income down to $9,000. So you shielded $1,000 of your earnings from being taxed!
Find more business write-offs, and you can shield more of your income from being taxed.
What counts as a Turo write-off?
The IRS counts anything that is “ordinary” and “necessary” to your business as a write-off.
These are everyday words, but in a tax context, they require a little bit of IRS translation. “Ordinary” means typical of other people doing the same job, while “necessary” means helpful for doing your work. (The IRS outright says it doesn’t have to be “indispensable.”)
Here are a couple of examples:
- ✘ Sweatpants you can wear while you take care of administrative Turo tasks don’t count
- ✓ A Sirius XM subscription does count. It’s a service many people have come to expect with their rental cars — making it an ordinary expense for Turo hosts
Let’s go through some more expenses you should remember to deduct.
Common tax write-offs for Turo hosts
Vehicle-related costs usually make up the bulk of a Turo host’s tax deductions, so we’ve got a whole section devoted to those just those.
For now, we’ll cover a bunch of other common expenses Turo hosts can write off on their taxes. (You can find more on our list of write-offs for rental car providers!)
- 💵 Turo marketplace fees
- 🥨 Water and snacks you stock the car with
- 📱 Part of your cell phone bill
- 🌐 Part of your internet bill
- 📰 Marketing costs, like a copywriter for your car listing
- 🌮 Business meals with people you refer to Turo
- 🎶 Your business-use percentage for music services like Spotify or Apple
Your business-use percentage is, simply, the amount of time you use something for work — instead of personal — purposes. More on that below, when we talk about car expenses.
How to track your write-offs
For less stressful filing, track your expenses throughout the year. That way, you don’t have to sort through a mountain of bills and bank statements when tax time arrives.
The best way to stay on top of your expenses? Use an expense-tracking app that does the job for you, like Keeper!
Keeper connects to your bank account and automatically looks over each statement to separate business expenses from personal ones.
You can file right in the app to lock in those savings, or export a spreadsheet detailing all of your eligible write-offs for your tax pro.
Put on cruise control, and let Keeper steer you toward tax savings.
How to write off your Turo car expenses
When you track your expenses, don’t forget everything you’re spending to maintain your rental car.
There are two different methods for writing off car expenses:
- Actual expenses method
- Standard mileage method
The best method for you will depend on how often your car is used for your Turo business.
For instance, if you only rent your car out once in a while, the actual expenses method might be the one for you. But if you expect your car to rack up a lot of mileage from renters, calculating standard mileage might be your best bet.
Curious about how we arrived at this rule of thumb? Check out our breakdown of actual expense vs. standard mileage. In the meantime, let’s talk through each method.
Method #1: Actual expenses
Using actual expenses, you’ll:
- Add up all the money you spent on your car throughout the year
- Multiply those costs by your business-use percentage.
Let’s say you drive your car for personal reasons 80% of the time, then rent it out on Turo the other 20%.
Let’s also imagine you spent about $10,000 on your car in the last year, on eligible deductions like:
- ⛽ Gas (as long as you’re filling up the tank, instead of relying on the people renting your car to do it)
- 🛢️ Oil
- 🛡️ Car insurance
- 🔧 Repairs and maintenance
- 🏷️ Vehicle depreciation if you’re a car owner
- 💰 Vehicle lease payments if you rent
Since your car was used for business 20% of the time, you’d be able to claim $2,000 worth of car expenses.
Method #2: Standard mileage
With this method, you keep track of the miles your car was driven for business purposes throughout the year. When you file your taxes, you can claim a set dollar amount for each of these business miles.
The rate is set by the IRS and changes every year. Or as was the case for 2022, it can even change twice a year! (This was because of the major spike in gas prices in the latter half of 2022). Those rates were:
- $0.585 per mile from January to June
- $0.625 per mile from July to December
So if your Turo guests drove your car a total of 2,000 miles in the first half of the year, then another 2,000 in the second half, you’d be able to deduct $2,420. That’s because (2,000 x $0.585) + (2,000 x $0.625) = $2,420.
Using the standard mileage method, you can also write off some expenses that have to do with your car. These include:
- 🅿️ Parking fees you pay specifically on work-related trips
- 🛂 Tolls fees you pay on work-related trips
- A percentage of your DMV fees
- 💵 A portion of your car loan interest
Now that you’ve got your list of expenses ready, let’s move on to how to go about filing your Turo taxes.
How to file your taxes as a Turo host
The jumble of numbers and letters you find in tax form titles don’t scream “approachable.”
The good news is, filing your Turo taxes doesn’t mean you have to memorize a stack of new forms. In fact, the process will likely feel pretty familiar to those who already have a handle on W-2 taxes.
Most Turo hosts are considered sole proprietors. This means the self-employment income you earn from renting out your car gets filed on your personal 1040 tax return. This keeps things relatively simple: you don’t need to file a separate business return at all.
(Some hosts might decide to start an LLC, but LLCs actually get taxed exactly the same as sole proprietorships by default.)
You can check out our step-by-step guide to filing your 1099 taxes. But here’s a glimpse at what the process looks like.
1. Fill out Form 1040 with your gross income
This is a form you’ll already be used to! Both W-2 and 1099 workers use it to file their taxes.
This should be easy — by now, you already have your 1099 from Turo or downloaded your income summary from the Turo website. (If not, go back to that section to learn how to do so.)
If you earned self-employment income from places other than Turo, you’ll also need that information handy.
Note: Form 1040 is where you’re prompted to take the standard deduction. Newly self-employed people often wonder if they can take the standard deduction and still write off their business expenses.
The answer is: Yes, you can claim both. Learn more about the standard deduction here!
2. Fill out Schedule C with your business expenses
Grab your list of deductions and use it to fill out your Schedule C.
You’ll also use this form to determine the amount of Turo income you’ll be taxed on: your gross income minus any business deductions.
3. Fill out Schedule SE
Now that you know your taxable income, use Schedule SE to figure out the amount of self-employment tax you owe.
If you want to get an idea of how much your FICA taxes might cost ahead of time, use our free 1099 calculator!
4. File your forms with the IRS
You’ll attach your Schedule C and Schedule SE to your 1040 and send them off to the IRS. In addition, there are a few other forms you should include:
- Schedule 1: For “Additional Income and Adjustments to Income,” including your self-employed health insurance deduction if you pay for your own health plan
- Schedule 2: For “Additional Taxes” — where you’ll put down your self-employment tax from Schedule SE
- Form 8995: To get your QBI deduction — an automatic tax break that self-employed people can use to lower their income taxes
If you decided to enter your information into the Keeper app and let us do the filing for you, we’ll automatically fill out all these forms for you. That way, you can sit back and catch up on some Netflix.
When to file your Turo 1099 taxes
The good thing about tax filing is that it only comes around once a year. Right?
Well, not exactly. Because you won’t have taxes deducted from your paychecks throughout the year, Turo hosts who expect to owe the IRS at least $1,000 have to pay their taxes in four annual installments — also known as the dreaded quarterly taxes.
Quarterly taxes are due on:
- April 15
- June 15
- September 15
- January 15
Keep in mind that these are estimates. You won’t always know how much you’ll earn from car rentals till the year is done.
What happens if you misestimate your Turo earnings?
The good news is, the IRS does provide a 10% buffer in case you underestimate what you owe.
You’ll still want to get as close to the mark as possible. To get a good idea of how much you should per quarter, use our quarterly tax payment calculator.
We’ve reached the end of our guide. But this isn’t where the road ends if you’re still looking for support in dealing with your rental car taxes.
Our tax resources page is full of articles that break down complicated tax talk into simple terms. And if you try out our app, you can ask a tax assistant any questions that you have.
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At Keeper, we’re on a mission to help people overcome the complexity of taxes. We’ve provided this information for educational purposes, and it does not constitute tax, legal, or accounting advice. If you would like a tax expert to clarify it for you, feel free to sign up for Keeper. You may also email firstname.lastname@example.org with your questions.