The proliferation of rideshare companies like Uber and Lyft has created a whole new income stream for many people.
As a driver for a rideshare company, if you don’t form a corporation, that means you’re considered an independent contractor or self-employed. At the end of the year, you’ll get a tax summary that includes your earnings and expenses – and you may be issued two IRS forms:
- A 1099-K if you earned more than $20,000 in customers payments and 200 transactions
- 1099-MISC if you earned any promotions, referral, or other miscellaneous bonus
Even if you don’t make enough to receive a 1099-K from a third party provider or a 1099-Misc for income earned as a freelancer or contractor, you still need to report your income on your taxes.
However, because the forms won’t capture the many tax deductions you can take as a driver (which can lower your tax burden significantly), here are some of the common business expenses you can claim:
One of your biggest tax deductions will be for business mileage at 54.5 cents per mile. When you file your taxes and report any mileage deductions, remember to include:
- Miles when driving a passenger
- Miles when driving to pick up a passenger
- Miles when driving home after dropping off a passenger
Some rideshare companies will record your in-ride miles and out-of-ride miles. This can help you calculate your total tax deduction for mileage. If you can, it’s best if you also keep track of this yourself since the rideshare app may not track all of your tax-deductible mileage. You can easily and automatically track your business mileage deduction year-round when you use the QuickBooks Self-Employed app.
If you claim the standard mileage deduction, you cannot claim actual car expenses. If you claim actual car expenses instead of standard mileage, you can claim expenses associated with maintaining your car based on a percentage of your business use. This includes expenses like oil changes, gasoline, car insurance, maintenance and repairs, lease payments, and depreciation.
All rideshare companies communicate with you through their mobile app. Since your phone is a business expense, you may be able to deduct the expenses associated with your phone.
This includes the cost of the phone if you purchased a new one this year. It also includes a percentage of what you pay for the cell phone service based on how much you use your phone for your business as compared to your regular personal use. If you use it half the time, then you can claim 50% of the cost for the business. If you purchased any accessories, like a car mount or spare charging cables, those accessories are also tax deductible.
Passenger Treats & Goodies
Did you stock your car with drinks, snacks, or other goodies that you give to your riders? If so, those snacks and drinks are tax-deductible expenses (as long as you offer them exclusively to your riders).
Fees & Tolls
If you have to pay for any fees or tolls associated with your driving that aren’t reimbursed through the rideshare company, those are expenses are also tax deductible.
For example, if you have to pay a toll and the rider doesn’t reimburse you, then you can claim it as an expense. If the rideshare company reimburses you because it’s app detects you went through a toll, then you can’t claim it.
Personal Grooming, Uniforms
Unfortunately, personal grooming expenses, like a haircut, and clothing are not tax deductible. Personal grooming is never tax-deductible and rideshare companies do not require a uniform, so you can’t claim work clothes as an expense. This also means dry cleaning your clothes is out too.
Driving for a rideshare company can be a great way to earn some extra income. And learning about all the business deductions can be a great way to keep more of it at tax time!
Don’t worry about knowing these tax laws. TurboTax Self-Employed will ask simple questions about you and your business and give you the business and personal tax deductions you are eligible for. You can also use QuickBooks Self-Employed to capture your income, expenses, and mileage year-round and then easily export the information to your TurboTax Self-Employed tax return.
If you have questions, you can connect live via one-way video to a TurboTax Live Self-Employed CPA or Enrolled Agent to get your tax questions answered right away. A TurboTax live CPA or Enrolled Agent can also review, sign, and file your tax return.