Taxation Deductions for Rideshare (Uber and Lyft) Drivers and Food Couriers

As a self-employed worker, tax deductions for business expenses are the best manner to prepare an accurate tax return and lower your taxes.

As a self-employed worker, taxation deductions for business expenses are the best way to fix an accurate revenue enhancement render and lower your taxes. You lot can deduct common driving expenses, including fees and tolls that Uber and Lyft take out of your pay. Your biggest tax deductions volition be costs related to your car . Yous may too want to deduct other expenses like snacks for passengers, USB chargers/cables, or separate jail cell phones for driving. If you don't take these deductions, more of your income volition be bailiwick to both income and cocky-employment taxes.

Due to the COVID-19, you lot may also accept Personal Protective Equipment (PPE) expenses like confront masks, hand sanitizer, shields, etc.

If you lot are a nutrient courier, you might have different deductions, similar food courier numberless, backpacks, and blankets. For example, if you wheel you can deduct the cost of bike repairs and equipment.

Preparing to file taxes and tracking tax deductions

Make certain to track taxation deductions every bit you go—it is much harder to recreate records subsequently! Compile a list of these tax deductions (with receipts) and a mileage log so you're prepared to file. Tracking concern expenses can too help you determine whether your driving is profitable.

Here are some tips to assistance y'all gear up your taxation deductions for filing:

  1. Create a organisation to rails your tax deductions. Make sure you empathise which expenses can be deducted and runway whenever an expense occurs. It doesn't matter if you use an expense-tracking spreadsheet (printable spreadsheet) or an expense-tracking app, just be consequent.
  2. Proceed a separate bank account or credit card for business. This can be a great way to keep personal and driving expenses separated. Y'all will as well be able to look back to your bank and credit statements for records as you're filing your taxes.
  3. Utilize apps to assistance yous. Apps can make tracking revenue enhancement deductions much simpler, especially when tracking mileage. 2 popular apps are Stride Tax (free) and MileIQ ($5.99 billed monthly for unlimited trips, complimentary for the outset 40 trips).
  4. Pay special attention to tracking mileage. If you drive, the mileage deduction will likely be your largest revenue enhancement deduction. It'south important to advisedly track your miles because the IRS requires a mileage log. Read the Mileage Deduction Guide for more data.
  5. Review your commuter dashboard. The dashboard contains important information that is generally not available elsewhere. Your almanac income will be included here, every bit well as some of the revenue enhancement deductions you qualify for. You lot'll observe the tolls and commissions that Uber and Lyft take out of your pay.

What can be deducted?

There are two categories of deductions that you tin can take, "operating expenses" and "vehicle expenses." Vehicle expenses are those related to driving your auto, including mileage, parking and tolls. Operating expenses are all other expenses, including Uber and Lyft fees and commissions, snacks for passengers, and price of cell phone plans.

Tax deductions must be expenses made purely for business organization reasons. If an expense besides benefits you personally, only the portion attributed to your concern is deductible. For example, you may have a jail cell phone that you utilise for driving about 25 pct of the time. In that case, you lot tin deduct 25 percent of the telephone bill as a revenue enhancement deduction.

There are 2 ways to deduct mileage. That will affect which expenses you lot can include.

  1. Standard mileage. Multiply your business miles driven by the standard rate (56 cents in 2021). This rate includes driving costs, gas, repairs/maintenance, and depreciation. Do Non deduct these costs separately. This is the more mutual and easiest selection.
  2. Actual auto expenses. Runway all of your driving expenses yourself. Bodily car expenses are difficult to track, so seek professional tax help. With this method, you lot can deducta percentage of your bodily costs for gas, repairs, vehicle depreciation, insurance, and other vehicle-related costs. This number is based on the percentage of time y'all use the vehicle for driving. Keep in mind that you lot volition need to have receipts to support these expenses.

The following graphic covers the diverse revenue enhancement deductions that you lot tin can take.

How to claim business expense revenue enhancement deductions on your taxes

You will file Schedule C to report your profit to the IRS. On this form, you record all your income and revenue enhancement deductions. You pay taxes on your internet income, which is your total income minus any business tax deductions.

You'll find your income data on the Uber or Lyft driver dashboard . You may as well receive two tax forms, Form 1099-K and Grade 1099-NEC. The dashboard and forms volition record your income and some of the tax deductions you authorize for.

Click on the sample 1099-K and 1099-NEC below for total images:

Including tax deductions on your Schedule C

Your taxation deductions related to vehicle expenses volition get on Line 9, Automobile and Truck expenses. You'll notice this section nether Function 2 of IRS Form Schedule C. For those who utilize standard mileage , this volition include the standard mileage rate and tolls and parking. For those who use actual expenses , include all vehicle-related expenses here.

The balance of your tax deductions will go on Line 27a, Other expenses. You'll also notice this department under Part 2. Yous'll list out these expenses on Role 5, Other expenses (Line 48). This can include Uber and Lyft fees and commissions, Lyft's Express Bulldoze Rental fees, snacks for passengers, the portion of your phone bill that y'all use for your chore, etc.

You'll record additional mileage information on Function 4 of the Schedule C. Part Four asks questions about your vehicle. Tape your total number of business organization miles, commuting miles, and all other personal miles. Exercise this separately for each car you lot drove that calendar year.

Sample Schedule C expenses:

All information on this site is provided for educational purposes only and does not constitute legal or revenue enhancement communication. The Center on Budget & Policy Priorities and the CASH Campaign of Maryland are non liable for how y'all utilize this data. Please seek a revenue enhancement professional for personal tax advice.

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