It’s everyone’s favorite subject: taxes! (Heh.) They’re unavoidable and complicated — perhaps even more so for workers like rideshare drivers. We help navigate the process for these and others who use their cars professionally, and thus are entitled to auto-related tax deductions.
Note: if your employer reimburses you for driving expenses—mileage, wear and tear, etc.—then you cannot take an additional tax write-off for the same expenses. But otherwise, if you drive professionally, check out the details below and see how you might save on your taxes.
Tax Deductions for Rideshare Drivers
Rideshare drivers—and others who use their cars for work—can in fact deduct several types of expenses on their taxes. But keep in mind: unless you use your vehicle exclusively for work purposes (and never for anything personal) you can’t deduct everything. Seasoned Uber driver Calvin from Texas gave us his best tax tips and advice for rideshare drivers, and anyone who uses their car as part of their professional life.
When claiming auto-related expenses, there are two choices: you can take a standard mileage deduction, which was 57.5 cents per mile for 2015, or you can deduct item by item—it’s worth figuring out which figure is bigger.
If you’re going the itemized deduction route, you’ll need to keep track of what’s for work and what’s not—and keep your records, too (receipts, mileage logs). Some common deductions rideshare drivers are eligible for:
- Miles driven for work (for rideshare drivers, that’s ferrying passengers). Keep track with Uber’s tracking technology, available in reports accessed through the driver or “Partner” app, or with apps like mileIQ.
- Portions of: oil changes, repairs, gas, insurance, mobile phone bills, tolls, parking fees, car washes and interior cleanings.
- Items purchased for passengers: chargers, auxiliary cables, snacks and water, etc.
Evan Pokorny, Uber driver and mechanic, tells us that if you bought your vehicle in the year for which you’re filing your taxes, you can write off the purchase (or a portion of the purchase, if the vehicle is also for personal use). Otherwise, write off the depreciation.
Turbo Tax reminds professional drivers that if you’re involved in a car crash that isn’t deemed your fault, and the other party’s insurance didn’t fully reimburse you for either damage to the vehicle or loss of use, you might be able to deduct the unreimbursed portion from your tax bill. If the car ends up being worth less after a crash, you can also deduct the depreciation.
One thing that’s never deductible: traffic fines, even while on the clock (but if you’re an Uber of Lyft driver, the company may pay certain tickets).
Filing Your Taxes
Calvin told us that since Uber drivers sign up in what the company calls an “autonomous process,” many first-time drivers don’t necessarily understand how compensation—and payment to Uncle Sam—works, and come tax time, drivers are often in for a tax bill surprise. Rideshare drivers are technically independent contractors, which means no one is taking taxes out of each paycheck. Drivers are responsible for paying all taxes on their own.
Rideshare drivers, and other independent contractors, usually receive a 1099 tax form from their employer (or “partner”). If you’ve only ever filed with a W-2 in the past, or you’re still employed full time elsewhere and rideshare driving is your extra gig, keep in mind that the process for the 1099 will be different—the biggest difference is how much money you’ll owe: the bill can be between 30 and 50 percent of your total income.
Some drivers may need to file quarterly estimated taxes—but it’s not always necessary. If you expect you’ll owe more than $1,000 in taxes, you need to look into filing quarterly. More info can be found here, on the IRS’ website.
Tax Resources for Rideshare Drivers
Blogs and other tax-related articles are a great way to familiarize yourself with tax code and learn about what deductions you may be eligible for, but since the IRS is perhaps the government organization you should mess around with least, you’ll want to verify everything for yourself. Some good resources:
- Rideshare drivers we spoke to said the IRS’ own website is an excellent source for taxpayers who use their vehicles for work.
- Info on 1099s can be found here.
- Tools for calculating depreciation can be found at Edmunds.com and Kelley Blue Book.
- Harry Campbell, The Rideshare Guy, offers more options for drivers looking to track miles with a handy app. Campbell emphasizes keeping your own records, in addition to the official company records, to ensure you’re getting everything you’re entitled to.
Remember: the IRS can conduct an audit up to six years after you’ve filed your taxes, so only deduct expenses you can prove, and file your records.