Intuit Academy Tax Practice Exam

What type of expense can a taxpayer deduct if they operate an upscale rideshare business?

1. Interest charges on vehicle loan

2. Cost of personal vehicle insurance

3. General maintenance fees for personal vehicle

4. Costs associated with business clothing

The correct answer is: Interest charges on vehicle loan

When a taxpayer operates an upscale rideshare business, they can deduct the interest charges on a vehicle loan because these charges are considered directly related to the business. The interest is classified as a necessary and ordinary expense incurred in the course of running the rideshare operation. This aligns with tax laws that allow for legitimate business expenses to be deducted, ultimately reducing taxable income. In the context of the other options, personal vehicle insurance, while potentially deductible under certain business use scenarios, is generally not fully deductible unless it pertains specifically to the business use of the vehicle. General maintenance fees for a personal vehicle might also fall into a similar category where only the portion attributed to business use would be deductible. Costs associated with business clothing can sometimes be tricky; they must be ordinary and necessary for the specific business to qualify for a deduction. Thus, while they might have some relevance to particular businesses, they do not typically apply to the operation of a rideshare service.