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Posted by Pat Raskob

Tax Tips for Uber, Lyft, & Other Ridesharing Drivers

Tax Tips for Uber, Lyft, & Other Ridesharing Drivers

When you work as a driver for a ridesharing company like Uber, Lyft, or another ridesharing service, the important thing to understand about your taxes is that you're probably not an employee of the ridesharing company. Drivers for these companies are often independent contractors, which has tax implications at the time of filing and throughout the year.

You are the boss and the employee.

Being an independent contractor means you are independent. With the rideshare company, you are the owner of a separate business entity that it uses to provide travel services. So when you receive a payment, you understand that it's not a traditional "salary," and most likely, no tax has been deducted.

It is your duty to take care of your state and federal income taxes and Social Security and Medicare. These fees can easily add up to 30% to 50% of your income, so set aside some money to pay them.

If you accept ridesharing fares more than occasionally, you may need to file a quarterly income tax estimate. When you file your tax return each spring, you'll report your self-employment income and expenses on Schedule C and complete Self-Employment Tax Schedule SE if your net income is $400 or more.

Tax deductions for your car

Since you are an independent contractor, almost all of the money you spend as a ridesharing driver will be a tax-deductible business expense. The first thing that comes to mind is your car. There are two ways to take a business use deduction for your vehicle:

  • By deducting the actual expenses of operating the vehicle for the company, including repairs, insurance, gas, oil, maintenance, and depreciation or lease fees.

  • Take the standard I.R.S. mileage deduction. The rate is 58.5cents per mile for the first half of 2022, increasing to 62.5 cents per mile in the last half of 2022.

If you make use of your car for personal and shared transportation, you can only deduct the portion of the expenses that apply to business use. And no matter what type of deduction you claim, keeping complete records is essential. The IRS may disallow any tax deductions it cannot allow:

  • Receipts

  • Mileage record

  • Any other documentation

Other tax deductions for Ridesharing drivers

The fees you pay to the ridesharing company are a business expense, as are any costs you may pay for the technology installed in your car. Other tax deductions include:

  • Water, chewing gum, or snacks for passengers

  • Road and parking fees

In addition, ridesharing companies usually require the use of a smartphone. The portion of your cell phone expenses attributable to your ridesharing job can be used to lower your self-employment income tax. For the sake of simplicity, it might be to your advantage to have a dedicated phone for work.

Understanding your 1099 forms

As a contractor, you won't receive a W-2 form from your ridesharing operator, but you will likely receive one or more 1099 forms. Ridesharing companies generally distribute these forms according to the same criteria:

Payments for processing customer payments are reported on IRS Form 1099-K. The figure shown in box 1a of this form represents all the money the rideshare operator collected from customers for the rides you provided. This will likely be more than what you received as payment, including commissions and other ridesharing business expenses. Your ridesharing provider will provide a tax summary that you can use to translate the 1099-K info into some of the expenses and income to report on Schedule C.

Payments for activities, such as referrals or non-directive bonuses, are reported on Form 1099-NEC (1099-MISC in previous years). This money is income that must be carried over to Schedule C.

If the rideshare operator processed transactions over $600 in tax in 2022, then you should obtain a 1099-K. For fiscal years prior to 2022, the limit is 200 transactions and $20,000 in payments. Also, if your non-driving income is less than $600, you will not be able to get a 1099-NEC. However, even if you do not receive a 1099, you are still responsible for paying and filing taxes on all income received.



Pat Raskob
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