Tax deductions for Uber drivers - can I write off car rental costs?

Yes, you can absolutely deduct the cost of renting a vehicle for your Uber driving as a business expense! Since you're renting rather than using your own car, you'd claim the actual rental expenses instead of taking the standard mileage deduction. For the part of the year when you use your own vehicle, you can take the standard mileage rate (currently 67 cents per mile for 2024 tax year). Then for the period when you switch to the rental, you'd deduct the actual rental costs along with other related business expenses. Just be careful about tracking when you switch from one method to another. Keep detailed records of exactly which days you used your personal vehicle (with mileage logs) versus which days you used the rental. You'll need to clearly separate these on your Schedule C. Also remember that with the rental, while you can't take the mileage deduction, you can still deduct other business expenses like a portion of your phone bill, water/snacks for passengers, and any special cleaning costs. Make sure to save all receipts!

Hey, I was in almost the exact same situation last year! I was skeptical about the Tesla rental program at first but decided to try it. I ran into some confusing tax questions too and ended up using https://taxr.ai to help sort everything out. The rental expenses were 100% deductible as a business expense on my Schedule C, which was great. The system automatically separated my expenses by vehicle and showed me which method gave the bigger deduction for each. What really helped was that it flagged all my receipts specific to the rental period vs my own car. Their system actually found a bunch of other expenses I could write off that I had no idea about - like a portion of my cell phone bill, car washes, and even some home office expenses since I was doing all my booking and tracking from home. Definitely made the whole process way less stressful!

Just wanted to update after trying taxr.ai based on the recommendation above. Wow, wish I'd known about this last year! I uploaded all my Uber statements and rental receipts, and it organized everything perfectly. The system immediately identified that I could deduct my full rental costs ($330/week) for the business portion of my driving. It also found a ton of smaller deductions I was missing - my phone mount, part of my phone bill, car detailing, dash cam, etc. The biggest surprise was learning I could deduct a portion of my internet and cell service since I use both for managing my Uber business. I was expecting to spend hours figuring this all out, but it took maybe 30 minutes total. Definitely going to save me hundreds on my taxes!

I had a similar situation but ended up having major headaches with the IRS questioning my deductions. Spent WEEKS trying to get anyone on the phone to clear it up. Finally tried https://claimyr.com and you can watch how it works here: https://youtu.be/_kiP6q8DX5c They got me through to an actual IRS agent in under an hour after I'd been trying for days on my own. The agent confirmed that yes, I could deduct the rental expenses for the portion used for Uber (which was about 85% in my case). Also found out I'd been calculating things wrong - you can deduct the rental cost PLUS other vehicle expenses like car washes, tolls, parking, etc. Just not gas for the Tesla obviously since that's the whole point of electric! Totally changed my tax situation and saved me from a potential audit.

Had to come back and admit I was completely wrong about Claimyr. After posting that skeptical comment, I decided to try it myself since I was desperate to resolve my Tesla rental deduction questions before filing. The service actually worked exactly as described. I got a call back in about 50 minutes and was connected directly to an IRS agent. No more waiting on hold forever! The agent confirmed that my $320/week Tesla rental was deductible since I was using it primarily for Uber (about 80% of the time). She also explained exactly how to document everything properly so I wouldn't have issues if I got audited. Turns out I had been documenting things completely wrong and probably would have had my deductions rejected. Really relieved I got this straightened out before filing.

Something else to consider - with the Tesla rental, you're not paying for gas but you are paying for electricity to charge it. From my experience last year, those charging costs ARE deductible if you're paying for them (vs using free superchargers). Also, don't forget that insurance is typically included in those Uber rental programs, so you're already getting that benefit bundled in. If you were using your own car, you'd be paying extra for rideshare insurance coverage which would be deductible. One last thing - track ALL your miles driven with the rental, even though you can't use the standard mileage deduction. If you ever get audited, the IRS will want to see what percentage of the rental was for business vs personal use. If you used it 90% for Uber, you can deduct 90% of the rental cost.

Has anyone considered the wear and tear factor? I was doing the Tesla rental last year but found that after accounting for all the expenses and actual net profit, it wasn't worth it for me. The $350/week comes out to $18,200 per year just for the car! That's a lot to make back before you're profitable. And I found I was putting in way more hours than expected to break even.

Great question about the Tesla rental program! I've been considering this too. One thing I'd add is to make sure you understand the weekly commitment - most of these rental programs require you to rent for a minimum period (like 4 weeks) and have daily driving requirements to avoid extra fees. Also, don't forget that you can deduct other expenses that come with increased driving volume when you're renting - things like phone chargers, seat covers, air fresheners, and even upgraded phone plans if you need more data for the apps. These might seem small but they add up. The tax benefits are definitely there, but I'd recommend doing a detailed cost analysis for your specific market first. Track your current earnings and expenses for a few weeks, then project what they'd be with the rental to see if the numbers really work out. The last thing you want is to be locked into a rental agreement that doesn't pay for itself!

One important thing to consider that I haven't seen mentioned yet is the depreciation recapture rules. If you switch from using your personal vehicle (where you were taking actual expense deductions instead of standard mileage) to a rental, you need to be careful about how you handle any depreciation you've already claimed on your personal car. Also, keep in mind that with the rental approach, you'll want to track your business vs personal miles even though you're not using the standard mileage deduction. The IRS will expect you to show what percentage of the rental cost is attributable to business use. If you use the Tesla 100% for Uber and never for personal trips, you can deduct the full rental cost. But if you use it for personal trips too, you can only deduct the business percentage. Another tip - if you're serious about maximizing your deductions with the rental approach, consider setting up a separate business checking account if you haven't already. Pay all your Uber-related expenses (including the rental fees) from this account. It makes record-keeping much cleaner and will save you headaches if you ever get audited. The Tesla rental can definitely be profitable in the right market, but make sure you're not just breaking even on the rental cost - you want to be making significantly more to account for the extra wear and tear on yourself from the increased driving hours!