If you have recently started driving for a rideshare company, it is important to stay on top of your tax expenses and deductions. Driving for companies like Uber and Lyft has become a very popular and lucrative way for people to make some extra money on their own time. The IRS sees you as a small-business owner, therefore you will have to pay self-employment taxes on top of your income tax.
Track Your Deductions
You are eligible for tax deductions for the business
expenses that come with operating out of your own vehicle. It is imperative to keep track of all your
expenses as they occur and always save any receipts from driving. The dashboard of your Uber or Lyft app will
keep track of all your fees and commissions but everything else is left to the
driver. Some of the most common
deductions for rideshare drivers are listed below.
Mileage – 58 cents per mile is the standard rate
for anything business related
Tolls and Parking
Uber and Lyft Fees and commissions
Cost of Phone – only the portion used for
business is deductible
Accessories – chargers, mounts
Save Your Tax Money
Your taxes are not automatically taken out of your income with a rideshare company. The amount of money you can withdraw from the app should not be total profit. Based on the amount of self-employment income, you may be required to make estimated payments on a quarterly basis to the IRS. If you expect to owe more than $1,000 in taxes after subtracting your withholdings, you will have to make estimated payments. This is all left up to the driver, as a small business owner, and is necessary to avoid an audit or fees.
When you finally go to file your taxes, this is when you will need all the documents and information you have been accumulating through the year.
1099-MISC and/or 1099K forms – you can access
these in the dashboard of Uber and Lyft or they will be mailed to you
Before the winter falls upon us, some people tend to make
last minute home decisions for the fall. Some of these include new roofs,
fixing a patio, or just outright remodeling your entire house. These remodeling
tasks seem completely separated from taxes, but the opposite is true.
First of all, where the money for the improvements is coming
from is important to figure out. Are you going to take out a loan, or are you
going to sell stocks. No matter what, an accountant can be a great help in
figuring out what capital gains you can make or the repercussions that rise
from these situations.
When remodeling your home, you should also track each major
improvement. It is recommended to use a spreadsheet to keep track of each paint
receipt, the fixtures, and the molding. Otherwise, they could get lost in the
clutter of planning and not be found later.
Why is keeping these receipts important? If you set these
receipts aside, you could possibly save money for the coming year’s deductions.
If the upgrades are energy efficient, you could write off up to 30% for those
systems. In addition, if you run a business from your home, you can depreciate
the cost over several years. Even if you aren’t part of those two cases, it is
still wise to keep all receipts in case a situation that applies to you arises.
Home improvement is much more than hiring workers and buying supplies. It is embedded in the tax world, and it is important to remember that. Where the money comes from and where your receipts and records go are very important aspects to both you and your accountant during tax season.
Though the 2019-20 school year has just begun, it is never too early to start thinking about college plans. If you or someone you know is planning to start college for the year of 2020-21, preparations to get federal student aid through the FAFSA program can begin as soon as October 1st. The FAFSA program gives around $120 billion to incoming freshmen in student loans every year.
Through either paper copy, the Federal student aid website, or the new myStudentAid mobile app, you can apply and learn about federal student aid and its importance. On their Facebook page, information about scholarships and deadlines are available for further reference.
No matter what the college is, they will use this FAFSA form in order to figure out how to give financial aid to their students. Even if you believe you won’t get any aid, chances are very likely that any student will qualify for some form of it. Even so, it is advised to apply as soon as possible to maximize the amount of student aid that you get. Don’t wait until the July 30th deadline to apply for this opportunity. Schooling doesn’t have to be that one expense you stress endlessly about, for options exist to help assist in payment as long as you look for them.
Going to college is a huge step in life to broaden your horizons. With this step, comes the hurdle of funding the education. For many, scholarships and grants make attending college a reality and because of this, the IRS is lenient on what they enforce as taxable scholarship money. It is important to differentiate ahead of time what part of the money is defined as income, and if it will add to your tax liability to avoid a surprise down the road.
Tax Exempt Scholarships
Generally, at an accredited college or university, students will avoid paying taxes when using their funds for basic education driven expenses. The IRS has deemed the following “qualified education expenses” that will not add to the tax liability of a student.
Books or any required course supplies
When dealing with scholarship funds, it is important to note that any left over money after the qualified expenses must be included as part of your taxable income. However, depending on what they are to be used for, certain scholarships are subject to taxation. Usually, these are scholarships or funds to pay for the following:
Room and Board
General living expenses (bills, food)
Taxable Stipend Scholarships
Finally, the other type of scholarship funds to be aware of are stipends. Stipend Scholarships are viewed as compensation for services you will provide in the future. For example, you can receive a $5,000 stipend with $2,000 designated to pay for your services. The $2,000 will be viewed as part of your taxable income, and the other $3,000 is tax exempt scholarship money. These types of scholarships are common for teaching and military services.
If you received a scholarship towards your education, it is important to find out the tax stipulations immediately. If part of your scholarship is subject to taxation you will usually receive a W-2 from the provider describing the taxable portion, and you can report this using Form 1040.