The modern side hustle many people now choose is to partner with taxi-hailing app companies like Lyft, Uber, and Rideshare and use your private car as a taxi. One of the most critical things you’ll need to understand is the tax liabilities and deductions. Now being that time to heed the IRS call, let’s take this juncture to solve matters liability and deductions for Uber or Lyft driver taxes.
As a rideshare taxi driver, here’s what you need to know
- Who pays taxes? Lyft or Uber driver must file IRS Form 1099-MISC and/or 1099-K if the total earnings per year exceeded $600 during the year. You are required to pay quarterly taxes if your income is over $1000 annually.
- Monitor and record your miles and expenses – with proper records, you’ll save money at tax time.
- Deductions – know them because there are a whole lot of them!
- Use the right tax forms.
Does a Lyft driver need to pay taxes?
Yes, though it isn’t completely straightforward like that of a W-2 employee. It’s a lot like running a personal business, and that means you’ll have to pay Self-Employment Tax if you earned net earnings of $400 during the previous year. A driver will just use the stats on the dashboard; the number of rides, tolls, non-ride earning, mileage covered, etc.
Why Lyft is Self-Employment
Since this ride-sharing company considers each driver an independent contractor, the whole partnership is akin to running a personal business. For those drivers who earned at least $600, they’ll be expected to file their own taxes.
Can you write off your car?
Tax deductions are always a huge incentive since they end up giving the driver a lesser tax bill. A mileage deduction is the most recommended and can lower the tax bill significantly since each mile is worth 54 cents (2017). Lyft, Uber and other rideshare companies do have the records, but aren’t as reliable as your own logs. You’ll need to have an accurate record of the miles covered – including the driving *between* drives and any drives related to your rideshare business (gas station, car wash..etc).
What other deductions should you know?
You can write off a few other factors since tax deductions can impact almost anything that you spend as a taxi driver. The best candidates for tax deductions have the following 3 characteristics:
- Ordinary and necessary expenses
- Expenses that directly impact the business
- Reasonable cost / expense
This would include: expenses like gum, water, and candy that you hand out to the passengers. Air fresheners, vehicle accessories (USB chargers), windshield wipers, air filter, carpet cleaning solution. Services: car wash, car detailing, smog test, additional keys..etc.
Most importantly – you can deduct the FULL COST of the software you use to create your mileage log!
ExpressMileage is the #1 Driving Log Maker for Uber, Lyft and rideshare drivers. We’ve helped thousands of drivers like you take the maximum deduction on taxes.