Intuit Academy Tax Practice Exam

What would qualify as a deductible business expense for a rideshare driver?

1. Personal phone bills

2. Cost of car washes

3. Luxury car rental fees

4. Payment for vehicle modifications

The correct answer is: Cost of car washes

The cost of car washes qualifies as a deductible business expense for a rideshare driver because it is a necessary expense incurred in the course of maintaining the vehicle for business use. Rideshare drivers need to keep their cars clean to ensure a good experience for passengers, which directly affects their ratings and overall business performance. Regular cleaning helps maintain the vehicle's condition and can contribute to better customer satisfaction, which is essential for success in the rideshare industry. In contrast, personal phone bills generally do not qualify for deduction unless a portion of the bill explicitly relates to business use, and even then, the deductible amount would need to be calculated proportionately. Luxury car rental fees are typically not considered deductible because they do not align with standard expenses incurred for the purposes of operating a rideshare service. Paying for vehicle modifications may also be a grey area, as such expenses can be capital in nature and subject to different rules regarding depreciation rather than being immediately deductible.