Hello annemarie368,
You mentioned car notes, there are couple of things to consider. Who owns the vehicle? If partnership owns the vehicle then the vehicle must be depreciated and actual expenses would be reported on Form 1065. Partnership may not use standard mileage method to compute the auto expenses for company owned car. If partner owns the vehicle then title must be converted to business.
Alternatively, you can have partnership reimburse partners for the auto expenses. You can add a clause to partnership operating agreement that explains how/what type of expenses will be reimbursed. Once partnership pays expenses, partnership will deduct those expenses on From 1065. These will result in lower income at partnership level and lower income on k1.
Third option is if you used your personal vehicle for partnership business and you are not reimbursed for those expenses, you can generally deduct those expenses. if you qualify. These expenses will not go Schedule C but it will go under Schedule E.
There are few questions that you have to consider.
- Are you an active participant in this partnership?
- Does the partnership reimburse you for your vehicle expenses? If so, the expenses go on Form 1065 and not on Form 1040.
- Does the partnership agreement state that you are required to use your vehicle?
Here is what IRS says :
https://www.irs.gov/instructions/i1040se#en_US_2023_publink24332td0e1927
Unreimbursed Partnership Expenses
You can deduct unreimbursed ordinary and necessary partnership expenses you paid on behalf of the partnership on Schedule E if you were required to pay these expenses under the partnership agreement. You can only deduct unreimbursed expenses on Schedule E that are trade or business expenses under section 162. Don't report unreimbursed partnership expenses separately if the expenses are from a passive activity and you are required to file Form 8582; otherwise, do the following.
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Enter unreimbursed partnership expenses from non-passive activities on a separate line in column (i) of line 28. Do not combine these expenses with, or net them against, any other amounts from the partnership.
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If the expenses are from a passive activity and you are not required to file Form 8582, enter the expenses related to a passive activity on a separate line in column (g) of line 28. Do not combine these expenses with, or net them against, any other amounts from the partnership.
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Enter “UPE” in column (a) of the same line.
Here is another helpful link.
https://turbotax.intuit.com/tax-tips/small-business-taxes/business-use-of-vehicles/L6hi0zzzh
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