Ordinary and necessary automobile expenses related to rental activities can be deducted as actual expenses or by take the standard mileage rate. These expenses are deducted on Schedule E, Line 6, line 19, and line 18. Let's break it down.
Actual Expenses:
1. You must use actual expenses if four or more vehicles are used simultaneously in the rental activity.
2. You will need to keep a mileage log to determine personal miles versus rental activity miles.
3. Actual expenses are the portion of fuel, repairs and maintenance, insurance, and registration related to the rental activity and get deducted on Line 6.
4. Rental and lease payments are deducted on line 19
5. Depreciation is deducted on line 18. You will need to complete From 4562 Part V.
6. You cannot use actual expenses for a lease vehicle if you previously chose to use the standard mileage rate
Standard Mileage Rate:
1. You cannot deduct rental or lease payments, depreciation, or actual expenses of fuel, repairs and maintenance, insurance, or registration.
2. You will need to keep a mileage log to determine personal miles versus rental activity miles.
3. Add up your rental miles for the year and multiply by the standard mileage rate. The standard mileage rate for 2024 is 67 cents per mile. Add in any parking fees or tolls. Report the expense on Line 6.
Note for either actual expenses of the standard mileage rate, you must complete From 4562 Part V
A great follow up resource is the Schedule E instructions found here: chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.irs.gov/pub/irs-prior/i1040se--2023.pdf
You can assign your car expenses to one of your property, there is no need to separate expenses for car between properties. I suggest to take the most profitable rental property. By the end, all combined income/losses from your all properties will flow to your form 1040 as the whole amount from your Rental business.
There is two methods for write-off your car expenses :
- Standard business miles;
- Actual expenses. (Depreciation, gas, repairs and maintenance etc)
You can choose any, just keep in mind, that if you choose Actual expenses - you will not be able to switch to Standard business miles method in a future years. You have to follow this method for all future years for this car.
When you put your car on the balance of your business you have to calculate total cost for this car including future interest. Usually, you can find it in your purchase contract. After that, you will just depreciate your car and do not count payment for your car as an expense.
Thank you for participating in this event!
Olga S.