Rental of vehicles

[Marie]

I have a client who rents his vans out. This is an individual, not Enterprise or any type of Company. How does he deduct expenses? Can he do mileage expense or does he have to use actual expenses? I understand vehicles used for taxis must use actual expenses, but he is not doing the taxiing, he rents the vehicle for someone else to drive.

[grandmabee]

I have a client who rents his vans out. This is an individual, not Enterprise or any type of Company. How does he deduct expenses? Can he do mileage expense or does he have to use actual expenses? I understand vehicles used for taxis must use actual expenses, but he is not doing the taxiing, he rents the vehicle for someone else to drive.

how many vans is he renting out? If three or more he is a fleet and actual expenses are required. I think this will be like renting of equipment and go on Sch C. Since he is not driving I think actural expense is the way. How else would they be business miles.

[RoyDaleOne]

It may go on Schedule E, the renting of equipment does not necessarily go on Schedule C.

It may be non-passive rental activity.

[Gail in Virginia]

It was my understanding that Sch. E was only for real estate and that the rental of personal property went on Sch. C always. If that is not so, could you please cite your source so I can look it up and educate myself? I have clients that might need this information.

[Marie]

I thought it would be actual expenses, too, but last year's tax pro took mileage and I told him that I didn't think that was correct. Like he said, it was easier, but not correct. Thanks for the input

[RoyDaleOne]

Are losses limited because activity is passive? Generally, long-term equipment rentals are passive, and losses (from Schedule C, E, F1065s or S Corporations) are not deductible unless taxpayer has passive income from another activity. An equipment lease of greater than seven days is generally passive. Whether or not the taxpayer materially participates is irrelevant. The IRC § 469©(2)&(4). Passive equipment rentals go on FORM 8582 and cannot be deducted in the absence of passive income. With short-term rentals, the activity is treated like a business and taxpayer must materially participate to deduct losses. See Reg. § 1.469-1T(e)(3)(ii) for exceptions to the rental definition.

http://www.irs.gov/businesses/small/articl...=146830,00.html

http://www.irs.gov/businesses/small/articl...=146318,00.html

Personal property. Do not use Schedule E to report income and expenses from the rental of personal property, such as equipment or vehicles. Instead, use Schedule C or C-EZ if you are in the business of renting personal property. You are in the business of renting personal property if the primary purpose for renting the property is income or profit and you are involved in the rental activity with continuity and regularity.

Please, notice the "continuity and regularity" requirement, if this test is failed, I don't know where the activity is entered. Heck, I don't the requirements of the test. lol

However, let me make this clear, I agree that Schedule C is the the correct choice almost every time.

However, what I was really trying to do is to make two comments.

1. Even on Schedule C it still maybe a passive activity.

2. Rentals entered on Schedule C are not necessarily subject to self-employment taxes.

I am glad I was corrected, when I failed to make a complete comment.