Get your taxes done using TurboTax

You report the expenses related to your wife's automobile use in the business in TurboTax Business, Federal Taxes, Deductions.

The TurboTax interview will step you through entering your vehicle expenses.  You will also be able to enter information to calculate depreciation for your vehicle.

You will then be able to decide whether using the standard mileage rate of 57.5 cents a mile for 2020,

You will have generated the numbers you will need to know for using if you choose to report your expenses on your personal return and NOT on the business.

There is no Option 2 as you describe.  If the expenses are entered in TurboTax Business, the loss will post to your K1 and it will pass-through to your K1.

You have already verified the LLC Operating Agreement states you are required to pay business expenses on behalf of the partnership for which you are not reimbursed. 
 

You can then deduct them as Unreimbursed Partnership Expenses in TurboTax Home & Business.  In the search box in the top left, type K1 and then click on the Jump to link. Update your K1 from your partnership. When you reach the Choose the Type of Partner screen, verify you have selected the Disregarded Entity box.

Continue through the interview until you reach the Describe the Partnership screen. 

Verify the first box I am required to pay supplemental business expenses on behalf of this partnership/LLC for which I am not reimbursed.

The next screen asks to verify the Partnership Agreement requires you to pay expenses out of your own pocket. 

Only If the Agreement states you are required to pay expenses out of your own pocket are expenses on behalf of this entity deductible.

The TurboTax interview will then allow you to enter various types of business expenses to reduce the amount of income passing from the partnership subject to tax on your individual return.

Ensure when you decide which way to handle the expenses, you remove any entries from TurboTax Business that may be duplicative based on the option you have selected.  

Also, as your wife contributes more capital to pay expenses, her capital account should reflect increases in her contribution to the partnership.