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12 Tax Deductions Rideshare Drivers Can Use
As a tax professional and a rideshare driver, I know if you’re currently reading this , it’s that time of the year when we’re all really thinking about our taxes. As a rideshare driver, you are now classified as an independent contractor, you are now responsible to pay your own taxes. You should receive 1099 form from your rideshare companies. It can be frustrating; you used to receive a W2 form which already included the taxes you’re already paid. Well, it’s different with a 1099 form since you are now a contractor, but don’t worry I’ll go over the process of filing your own taxes and most importantly make it easy and simple to file.
As a current uber driver and an experienced tax professional, I’ll talk about a number of tax deductions that you are qualified for as an Uber driver.
Rideshare drivers have the option of claiming deductions based on itemizing business related expenses or use the standard mileage rates.
In other words, you can either use the mileage deduction when you’re doing your taxes OR you can chose to itemize your expenses such as fuel, insurance, repairs, maintenance, etc… But you cannot claim both.
Should you chose to go with the mileage deduction, you only have to worry about the number of mileage you accumulated when you conducted your business. The standard mileage rate is 57.5 cents/mile for business miles driven.
If you use the standard mileage rate, it is best to keep track of your car mileage that is business related. It is probably better for most rideshare drivers to keep track of the mileage, so most will use the standard mileage comes the tax filing day.
Did you know your rideshare statements only show you the mileage when a passenger in your vehicle? That’s not only the mileage you can tax deduct, it’s only a fraction.
The minute you left your home or parking spot searching for your first rider, and until you drop off your last passenger and back to your place is your total business miles and they are tax deductible. So it’s crucial to keep track of every mile driven for business purposes.
Well, obviously if you stop driving for your rideshare companies so you can run a quick personal errand, those miles won’t count toward your tax deductions. In other words, the mileage has to be business related and not personal.
If you chose to itemize your expenses, that’s fine too. Below are 12 tax deductions that rideshare drivers such as Lyft, Uber, and others can use.
If you lease a car, you can deduct a proportion of the car lease payment if in fact you use the vehicle for ridesharing services, Uber, Lyft, etc…
Interest on Auto Loan (Owned)
Since you are a contractor and your vehicle is an important part of your business; obviously without it you wouldn’t be able to share ride. You can deduct a portion of the interest expenses, the reason you cannot deduct ALL your interests because you also use the same vehicle for personal use.
If you buy a car, you can tax deduct the cost or value of your car over a 5 year period through depreciation. Your car can be depreciated in many ways. The main difference will be in how you stretch the depreciation expense throughout the 5 year period.
You can deduct fuel expenses, but make sure you save all of your receipts, it’s important if you get audited by the IRS. You can only use a tax deduction on your fuel costs as long as it was when you were conducted your rideshare business.
If you are en route for a meeting with potential Lyft or Uber drivers that you are trying to sign up, you can deduct those fuel costs as well.
You will only be able to tax deduct some maintenance and repair cost since you are using your car for both personal and business matter. Some examples of what you can use as tax deductions are: new tires you bought, oil changes, tire rotations, inspecting and replacing brake pads, and anything else required to maintain your car for your rideshare business.
The cost of the new smart phone you’ve just bought for Uber or Lyft is tax deductible. Some of your cell phone payments can be deductible as well. As I stated many times, you can only take a deduction for the time you used it for your business use.
As rideshare drivers, we use our smart phone for business purposes, you can deduct some of your cell phone bills, but not all since you use your phone for both business and personal use. You can’t deduct the part of personal use. You will have to find out how much data and phone calls are business related.
Food and Drinks for Passengers
You can still deduct things you buy for the business that are not vehicle-related, but needed for business purposes, things like drinks/snacks for the “passengers”. You can deduct them as supplies. You can also deduct other few things if they were “necessary and ordinary” to maintain your business.
Keeping your car clean is part of your rideshare business. As an Uber driver, you will need car washes on a regular basis so your customers happy and don’t low rating you. Since your car washes are considered part of what IRS described as “ordinary and necessary” operating expenses for your business, you can tax deduct those expenses on your tax returns.
The other I met a female uber driver who actually signed up with AAA for roadside assistance, how smart! Any roadside assistance plan that you signed up for because of your rideshare business will be tax deductible. Remember, you cannot use it for personal trips, other than that you set to go to deduct the entire amount.
This one is pretty much straightforward; I have to say you can only deduct the cost of parking fees if you are actually working either for Uber, Lyft, and I was going to say Sidecar, but it’s out of business. And yes garages and meters fees are also included.
Not all toll fees are deductible; for instance on your way to pick up a passenger and you paid tolls, these fees are deductible. If you drive for Uber, they reimburse you the toll fees when you actually have the passenger in your car.
With that being said, the tolls fees that Uber pay you back are not deductible. In other words, you can only deduct the cost of tolls you paid to pass through on your way to pick up an uber rider.
How to fill out your schedule C
Gross Fares (Part I Line 1 of Schedule C)
Less: Tolls (Part II Line 10 of Schedule C)
Less: Split Fare Fees (Part II Line 10 of Schedule C)
Less: Safe Rides Fees (Part II Line 10 of Schedule C)
Less: Phone Fees (Part II Line 27a – Other Expenses of Schedule C)
Less: Uber/LYFT Fees (Part II Line 10 of Schedule C)
Less: Mileage Fees (Part II Line 9 of Schedule C) – See Note 1.
Less: Other Expenses (Part II Line 27a – Other Expenses of Schedule C) – See Note 2.
= Total Expenses (Line 28 of Schedule C) – See Note 2.
Income – Expenses = (Line 29 of Schedule C).
*And this will flow to Line 12 on Page 1 of your 1040.
Note 1: This is assuming you took deductions by the mile and not by the actual car maintenance and fuel fees, here’s how you calculate your mileage deduction.
Miles Driven x 57.5 cents
Note 2: Other Miscellaneous expenses not attributed to fuel or maintenance fees. For example, I deduct my car mount and car chargers that are there specifically for passengers.