When you move beyond being a hobbyist and start treating your Turo fleet as a legitimate business, your tax strategy needs a major upgrade.
While most casual hosts stick to the standard mileage deduction because it is simple, serious hosts looking to scale often turn to the Actual Expenses method.
This choice unlocks two of the most powerful tools in the tax code: Section 179 and Bonus Depreciation.
In 2025, the tax landscape has shifted dramatically. Thanks to the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, we have seen a massive return to 100% bonus depreciation for assets acquired after January 19, 2025.
This creates a unique opportunity to potentially write off the entire cost of a vehicle in a single year. However, it requires navigating strict IRS rules regarding vehicle weight and business use.
The 50% Rule: The Gateway to Accelerated Depreciation
Before you can even consider Section 179 or Bonus Depreciation, you must pass the "Qualified Use" test. To use either of these methods, your vehicle must be used for business purposes more than 50% of the time.
Turo hosts often run into trouble here if they use their rental car as a personal daily driver. If your business use percentage drops to 50% or lower, you are barred from Section 179 and Bonus Depreciation entirely.
In that case, you must use straight-line depreciation over five years. Keeping a meticulous mileage log—separating personal trips from Turo "delivery" or "maintenance" miles—is the only way to defend this deduction in an audit.
Section 179: The "SUV Secret"
Section 179 is designed to allow small businesses to deduct the full purchase price of equipment in the year it is bought. For 2025, the OBBBA has raised the maximum deduction to a staggering $2,500,000, but there is a major "catch" when it comes to passenger vehicles.
- Standard Sedans: If you buy a small car (under 6,000 lbs GVWR), your Section 179 deduction is capped at $12,200.
- Heavy Vehicles: If you purchase an SUV, truck, or van with a Gross Vehicle Weight Rating over 6,000 lbs, that cap jumps to $31,300.
This is why you see so many professional Turo hosts gravitating toward heavy hitters like the BMW X5, Tesla Model X, or Chevrolet Tahoe. They are not just buying luxury; they are buying a significantly larger tax shield.
Bonus Depreciation: The 100% Reset
While Section 179 has frustrating dollar caps, Bonus Depreciation is often the preferred choice for hosts because it typically has no annual dollar limit.
For vehicles acquired and placed in service after January 19, 2025, the OBBBA reinstated Bonus Depreciation at 100% indefinitely. This means if you buy a $60,000 heavy SUV and use it 100% for Turo, you could potentially deduct the full $60,000 in Year 1.
For "light" vehicles (under 6,000 lbs), the 100% rule still applies, but it is subject to "luxury auto" limits. These usually cap your total first-year write-off at $20,200 for 2025.
The Strategic Choice: Which One to Use?
You do not always have to choose one or the other; you can actually combine them. The IRS generally requires you to apply Section 179 first, followed by Bonus Depreciation.
The primary difference lies in how they affect your bottom line.
- Section 179: Cannot create a "Net Operating Loss"—you can only use it to bring your business income down to zero.
- Bonus Depreciation: This can create a loss that you may be able to use to offset other income, such as your W-2 salary, provided you meet "material participation" requirements.
The Recapture Trap
The biggest mistake hosts make is forgetting that these deductions are a "timing" benefit, not a "disappearing" benefit.
If you write off 100% of your car in Year 1 and then sell that car in Year 3, you will likely face Depreciation Recapture. The IRS will treat the sale price as ordinary income because you already "used up" the value of that car on your previous tax returns.
Professional hosts plan for this by either trading into a new vehicle via a "1031 exchange" (if applicable) or setting aside cash to cover the tax hit upon sale.