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Sure-Fire Secrets to Profiting From the Gig Economy


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5/21/2018
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Sure-Fire Secrets to Profiting From the Gig Economy

The gig economy is really taking off.  You’ve probably heard of Uber and Air BnB, but have you heard about Postmates, Doordash, Turo, Homeaway, Boatbound, Turning Art, Parkingpanda, Closet Collective, Grubhub, Instacart, Amazon Flex, TaskRabbit, Dolly, Dogvaca, Hubstaff, Fiverr, Urban Massage, Upcounsel, Homehero, Lawnlove, Udemy, Glamsquad, and thousands more!!!  The gig economy is really changing the way we work.

Uber is easy, and we will use Uber as an example, but the same concepts and rules apply to all of the gig economy businesses.  Are you an Uber driver?  Uber drivers can take tax write-offs as a business-owner.  You can deduct payments for apps you use on the road, for water/refreshments you supply to riders, and for your home office to account for mileage, tips, etc. 

Writing Off the Uber Automobile

In terms of writing-off your Uber automobile, you can use mileage or actual (lease or own).  The mileage method is simple and you can track it manually or use an App like MileIQ, or even an old-fashioned memo pad in the glove box.  The actual method may be beneficial for people who own or lease and have more complex scenarios where the actual expenses may go above and beyond the IRS mileage rate of 54.4 cents per mile.  For new cars, you can take bonus depreciation, and owners can write-off gas, maintenance, etc., so make sure you use the same credit card for all gas and maintenance or keep your receipts. 

Making Sure to Manage Your Estimated Payments

You will receive a 1099 from Uber… So, you have to be sure to make an allowance for required Estimated Payments.  A good idea is to use one period to get an average and then put aside on a ratable basis what you think you’ll owe (25% is also a good rule of thumb) into a separate savings account.  You don’t want to get hung up at the end of the year with a tax bill for which there was no withholding and find yourself with no money to pay a big tax bill.



Category: Tax Law


2 Comments to "Sure-Fire Secrets to Profiting From the Gig Economy"

The money you make from renting the car on the Turo platform is taxable income. By creating an LLC you are creating a formal business structure. Under the Tax Cut & Jobs Act, there is a new deduction for pass-through business income. You have to have an LLC or S-Corp to take advantage of the tax savings. Under the new IRC Sec. 199A, "Qualified Business Income" allows an owner of a pass-through entity to take a 20% deduction. So, if your Turo income is $20,000, you can take a QBI deduction of $4,000 and you will be taxed on $16,000. Also, section 179 of the IRC allows you to FULLY deduct the cost of a newly purchased business asset. So, buying a car (i.e., $80,000 purchase) or leasing a car (i.e., $1,023/mo for a luxury vehicle) would fully offset your business income in YR 1 and you could carry the loss forward to YR 2 and offset up to 80% of that year's taxable income from the business. If you read Form 4562 you will find some helpful information and instructions on how the depreciation deduction works. There are some tricky rules here under TCJA -- the GWWR weight must be 6,000 lbs to take the 100% bonus depreciation. Otherwise, you fall under certain "caps" on annual depreciation: For both new and used passenger vehicles that are acquired and placed in service after 12/31/17 and used over 50% for business, the TCJA dramatically and permanently increases the so-called luxury auto depreciation allowances. For vehicles placed in service (put to business use) in 2018, the maximum allowances are:

* $10,000 for Year 1 or $18,000 if you claim first-year bonus deprecation for a "luxury vehicle."

* $16,000 for Year 2

* $9,600 for Year 3

* $5,760 for Year 4 and thereafter until the vehicle is fully depreciated

If you don’t use the vehicle 100% for business, these allowances are cut back proportionately. These allowances will be indexed for inflation for 2019 and beyond.

However you cut it, and you need to look at each individual situation, you are going to have a lot of tax breaks and advantages for the purchase, use and commensurate expenses for your Turo business. These range from the QBI deduction (which requires a pass-through entity), to the bonus depreciation, to normal business deductions for mileage or actual expenses (gas, repairs & maintenance, home office [also requires entity], legal/accounting, supplies, etc. Much of the business income generated will be tax-free or taxed at a low effective rate, potentially 8-11% versus 24-37% for your wage income.
Posted by John Fazzio on May 24, 2018 at 06:59 AM
For a site like Turo which offers peer to peer vehicle sharing, are there any tax advantages to starting a llc, and then purchasing and registering the vehicle you plan on sharing in the name of the newly formed llc?
Posted by Michael Mazzola on May 23, 2018 at 10:54 PM

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