If you’re an Uber or Lyft driver, you probably work as an independent contractor or sole proprietor, which means you’re self-employed. When you’re self-employed, taxes are not withheld from your paycheck—but you are still responsible for paying them. On the bright side, you may be able to deduct a large portion of the business expenses you rack up while driving. What’s so great about deductions? They reduce your tax bill, which translates to savings.
Rideshare Mileage Deduction Methods
As a ride-share driver, there are two ways you can calculate the cost of operating your vehicle for business.
You can choose to multiply your miles driven by the standard mileage rate for the year (54.5 cents/per mile in 2018). So if you drove 10,000 miles for Uber in 2018, you would be able to deduct $5,450 for business expenses using the standard mileage method.
Otherwise, you can track and add up your actual expenses. Then, you will deduct a portion of your total costs, based on the number of miles you drove for business.Using the actual expense method requires very good record-keeping. You’ll need to hang on to your receipts, but doing so allows you to calculate what it really cost to drive all year. With the actual expense method, you have the option to deduct all of the following:
- Gasoline expenses associated with the business use of your vehicle. Note: If you opt for the standard mileage rate, you can’t take this deduction.
- Vehicle maintenance expenses, including oil changes, tires, inspections, brakes, and other costs that keep your vehicle in good running condition. Note: If you opt for the standard mileage rate, you can’t take this deduction.
- Vehicle insurance costs associated with the business use of your vehicle. Note: If you opt for the standard mileage rate, you can’t take this deduction.
- If you lease your vehicle, deduct part of your lease payment on your tax return.
- If you own your vehicle, take a depreciation deduction.
- Car registration expenses may be partially deductible, depending on your state. Note: If you opt for the standard mileage rate, you can’t take this deduction.
- Car wash expenses when related to your business.
- Parking fees and tolls while on the job.
- Membership expenses related to your business (AAA, for example).
- Cell phone expenses: If you use your cell phone exclusively for your business, you can deduct the entire amount. If not, you can deduct the portion associated with your ride-share business. The same holds true for your wireless plan.
- Food and drink expenses for your clients are deductible up to 50%.
Want to know more? Read also Deducting Business Mileage: The Standard Rate vs. The Actual Expense Method
Detailed Records and Receipts
It’s important to organize and store any paperwork, such as receipts, related to your business income, purchases, and expenses. Your mileage log should list the dates you drove, where you drove, and the total miles driven. There are two very good reasons why you should keep detailed records:
- You’ll have an easier time filing your tax return.
- You’ll be able to prove that what you report on your tax return is true if the IRS comes knocking.
Help Filing Self-Employed Taxes
Your self-employed tax situation might have you asking a lot of questions:
Are my taxes too complicated to do myself…? (Hint: they’re not!)
When you use TaxSlayer’s Self-Employed Edition, you’ll have all the instructions, forms, and additional support you need to e-file with a 1099 (or without). We help you fill out your forms by asking simple questions. Then we input your answers into the appropriate tax forms. All the calculations on your tax return are automatic, which means you don’t have to worry about doing the math yourself. And if you need more help, you’ll have access to an experienced tax pro specializing in self-employed tax situations.
This article is up to date and accounts for tax law changes for tax year 2018 (tax returns filed in 2019). Learn more about tax reform enacted under the Tax Cuts and Jobs Act here.