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
