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 Rate for 2020 is 57.5 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
- Printout of your Uber/Lyft dashboard
- Mileage Report
- Receipts/Invoices/Credit Statements
- Expense report – a list of any other deductions