Tax Deductions for Rideshare that is Uber and Lyft, Drivers and Food Couriers
Things that you should be doing throughout the year to make taxes a bit easier at tax time.
Tracking your mileage
For the 2022 tax year, you can deduct 62.5 cents per mile for the business mileage you drove in late 2022 and 58.5 cents for early 2022.
For rideshare drivers specifically, you can deduct the miles on the way to pick up your first passenger, between passengers, and on your way home from your last passenger trip, in addition to the miles that you drove with passengers in your car.
To find your 2022 mileage if you weren’t tracking it, you can use the “on-trip mileage” line on your Uber Tax Summary statement. This will not capture the mileage between trips or on your commute, but it will give you a conservative number and your Uber receipts can act as proof. Multiply your total mileage by $0.58.5 or $0.625 to find the tax-deductible amount.
Preparing to file taxes and tracking tax deductions
Track your tax deductions. Make sure you understand which expenses can be deducted and track whenever an expense occurs. It doesn’t matter if you use an expense-tracking spreadsheet (printable spreadsheet) or an expense-tracking app.
Keep a separate bank account or credit card for business. This can be a great way to keep personal and driving expenses separated. You will also be able to look back to your bank and credit statements for records as you’re filing your taxes.
Use apps to help you. Apps can make tracking tax deductions much simpler, especially when tracking mileage. Two popular apps are Stride Tax (free) and MileIQ ($5.99 billed monthly for unlimited trips, free for the first 40 trips).
Pay special attention to tracking mileage. If you drive, the mileage deduction will likely be your largest tax deduction. It’s important to carefully track your miles because the IRS requires a mileage log.
Review your driver dashboard. The dashboard contains important information that is generally not available elsewhere. Your annual income will be included here, as well as some of the tax deductions you qualify for. You’ll find the tolls and commissions that Uber and Lyft take out of your pay.
How to claim business expense tax 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 tax deductions. You pay taxes on your net income, which is your total income minus any business tax deductions.
You’ll find your income information on the Uber or Lyft driver dashboard. You may also receive two tax forms, Form 1099-K and Form 1099-NEC. The dashboard and forms will record your income and some of the tax deductions you qualify for.
What can be deducted?
There are two types of deductions that you can take, “operating expenses” and “vehicle expenses.” Vehicle expenses are those related to driving your car, including mileage, parking and tolls. Operating expenses are all other expenses, including Uber and Lyft fees and commissions, snacks for passengers, and cost of cell phone plans. Tax deductions must be expenses made purely for business reasons.
There are two ways that drivers can take deductions: The Standard method, and the Actual costs method.
Cell Phone Expenses
As a rideshare driver, you need a reliable phone with sufficient storage and cell phone data. Your phone purchase, monthly service bill, power adapter, and dashboard holder are all tax-deductible. If you use your phone for personal reasons as well, you can only deduct the approximate percentage that you use for work.
Car Interest Payment
Although you cannot deduct an auto loan in its entirety, you can deduct the percentage of the interest payment that can be attributed to the business use of your car. If you use your car for business purposes 75 percent of the time, and you made annual auto loan interest payments of $2,000, you can deduct $1,500.
Paid app Services:
Did you buy Spotify for your rideshare business? If so, expense it!
Drivers can deduct paid apps that they use for their business according to usage. If you use Spotify, Apple Music, or Tidal 30 percent of the time for your rideshare business, then you can deduct 30 percent of the cost.
Don’t get too carried away with deductions!
Take as many deductions as you can but do it legally. You must be careful because certain types of write-offs are monitored closely by the IRS. Claiming them will put you at risk of audit. Some examples include clothing purchases, personal hygiene costs, and excessive restaurant expenses—actually, anything that’s excessive can attract unwelcome attention from the IRS. Tax filing software like Keeper Tax will automatically alert you if your tax return could be considered suspicious.
The information above is meant only for guidance purposes.