Hi, I use my car for business purpose (I'm a part time real estate agent) and also for my personal rental properties. How to enter vehicle expenses on Schedule C and E?

[Jessicaguo]

For example, I use 200 miles for business, and 300 miles for rental, and 500 miles for personal purposes. It seems that if I put vehicle expenses on both places - (20% usage for business and 30% on rental keep all other costs such as registration, car repair, etc the same), Turbotax treated my car as two separate cars... The depreciation seems not correct in this case (I prefer using actual expense since this will give me a bigger return).

[PatriciaV]

Yes, you can report the vehicle for both activities and split actual expenses between the two businesses. However, you should enter the vehicle only once for depreciation.

Your other option is to report all the auto expenses on one business (ex: Schedule C). Then add a miscellaneous expense for "auto expenses transferred to Schedule E" with a negative amount. On the Schedule E business, add a miscellaneous expense for "auto expenses transferred from Schedule C" with a positive amount.

Keep good records to prove how the vehicle was shared between the two activities.

[AmeliesUncle]

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@Jessicaguo wrote:
For example, I use 200 miles for business, and 300 miles for rental, and 500 miles for personal purposes. It seems that if I put vehicle expenses on both places - (20% usage for business and 30% on rental keep all other costs such as registration, car repair, etc the same), Turbotax treated my car as two separate cars... The depreciation seems not correct in this case (I prefer using actual expense since this will give me a bigger return).

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Yes, the program would be treated as two separate vehicles.

The depreciation should be perfectly fine.  Sort of/maybe.  If the total business/rental usage is over 50%, you have the option to use "accelerated" depreciation, but having it split won't allow you to do that.  Was the vehicle used before 2024, and if so, was it using "accelerated" depreciation (Bonus depreciation, 200%DB, or Section 179)?  If the total business/rental percentage was 50% or less (including in prior years), that doesn't apply and splitting it is fine.

[AmeliesUncle]

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@PatriciaV wrote:

However, you should enter the vehicle only once for depreciation.

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You can't do that unless you are also allocating some to the other activity.  You can't include the full expense on on Schedule because it would alter the profit of that activity and alter SE tax.

[Jessicaguo]

Thank you so much for your response! It makes sense to me and i found it easy to understand. However I still got some issues here...

I tried your suggestions for the following: "

Your other option is to report all the auto expenses on one business (ex: Schedule C). Then add a miscellaneous expense for "auto expenses transferred to Schedule E" with a negative amount. On the Schedule E business, add a miscellaneous expense for "auto expenses transferred from Schedule C" with a positive amount."

When I run through the federal check, it gives me an error on Schedule C. "Other expenses Amount must not add up to a negative value. If negative value have been used as an adjustments to reduce other Line 48 expenses, the adjustments must not reduce the total below $0. "

Because of the negative adjustment on schedule C (I actually don't have any "other expenses"), my line 48 is negative. I guess the tax forms do not allow it. I'm wondering is there any other ways that I can use to allocate the expenses between schedule C and E? Really appreciate any thoughts. Thank you.

[Jessicaguo]

My understanding is that for one car, I can only enter the depreciation in one place (Schedule E or C). Otherwise, the tax forms treated there are one car used for Schedule E, one car used for schedule C.. which the depreciation will not make sense anymore. 

Not sure if my understanding is correct? Could you please share your thoughts on the best practice to allocate the car expense on schedule E and schedule C? I think my scenario is not uncommon. But I'm not able to find a good solution online. Thank you.

[AmeliesUncle]

Was the vehicle used over 50% for business/rental in the first year it was placed in service?

Was the vehicle used over 50% for business/rental in the current year?

If either are "no", then enter it as two separate vehicles, one for the rental and one for the business.  If the first answer is "yes" and then the second answer is "no", there may be "recapture" to deal with.

[Jessicaguo]

Thank you for your reply.
I have “yes” for both questions… 

[AmeliesUncle]

There is no "good" way to do it.

The correct way would be to report it as two vehicles, but then manually calculate and override the depreciation to correspond with the accelerated depreciation schedule.  But the overrides will cause the program to not allow you to e-file and it may void the programs calculation guarantee.

[Jessicaguo]

Thank you so much! It helps a lot!