One important part of being a rideshare driver that many people overlook is taxes! Taxes can creep up on drivers suddenly, but doing them doesn’t have to be costly or difficult. Here’s what drivers need to know about self-employment taxes.
Buckle has partnered with Harry Campbell, founder of TheRideshareGuy.com, to provide our Members with the very best tips, tricks, and news to help maximize their income as a rideshare and delivery driver.
Being a contract worker or self-employed often means that your tax situation could be a little more complex than someone with a W-2 job. Whether you’re thinking about becoming a rideshare driver or have already started, understanding the tax implications is important.
Luckily, understanding rideshare driver taxes is not so challenging when you break down the key components. Here’s what you need to know. Keep in mind that these are just general comments, and not tax or legal advice. If you have questions related to your specific situation, please consult your accountant, tax attorney, or tax preparer.
Understanding Your Independent Contractor Status
Working as an independent contractor offers a lot of flexibility and freedom. For example, you can set your own schedule based on your availability when you drive for an app like Uber or Lyft. You can also work as little or as much as you want. However, taxes won’t be deducted from your earnings like they would with a W-2 job where you’d have an employee status.
Instead, you’re responsible for paying your own taxes and quarterly estimated taxes during the year. You can get a professional to help you file your rideshare taxes or you can file them online using tax prep software such as H&R Block, Turbo Tax, or FreeTaxUSA.
Receiving Your 1099 Form(s)
At the end of each tax year, the rideshare company will send you a 1099 form. Uber and Lyft will send a 1099 form if you have more than 200 transactions or earn more than $20,000 for the year. In some specific states, the earnings threshold is lower so you still might receive a 1099 form if you bring in less than $20,000.
With rideshare driving, there are two main types of 1099 forms you can receive.
- 1099-K - This reports the total amount passengers paid for trips you provided along with any other Uber commissions.
- 1099-NEC - This shows any other income you’ve been paid whether it’s referrals or non-driving related bonuses.
It helps to track your earnings independently as well so you can confirm that what’s being reported on your 1099 form is accurate. Even if you don’t receive a 1099 form from Uber or Lyft, you’ll still need to pay taxes on the money you earned from rideshare driving so keep that in mind.
Using the information from your 1099 form or personal tracking system, you’ll fill out a Schedule C form to file your taxes. A Schedule C is similar to a Profit and Loss business statement and sums up what you earned and what you spent in order to maintain your status as a rideshare driver during the year. You’ll fill this out in addition to the 1040 form when you do your taxes.
On your 1099 form, Uber and Lyft will also include any fees you were charged whether it was for tolls or split fares. You can list these expenses on your Schedule C as deductions. This means you won’t have to pay taxes on them.
Deductions are a very important part of completing your rideshare taxes because they can save you a lot of money. One of the best parts about being an independent contractor is that you can write off business expenses and deduct them from your total income.
As a result, you’ll typically be responsible for paying taxes on your net income (gross income minus fees and business expenses). One of the most common driver expenses you can deduct is your mileage.
As a driver, you’ll be putting in a lot of miles each week. The IRS has a standard mileage deduction which can be applied to all the miles you drove when you were logged into the app transporting passengers. In 2021, the standard mileage deduction was $0.56 per mile. For 2022, it’s $0.5850 cents per mile.
This means if you drove 15,000 miles for Uber in 2021, your expense would equal $8,400.
(15,000 x 0.56 = $8,400)
You may also be able to deduct other business expenses such as:
- A portion of your smartphone expenses (used to operate your rideshare driving business)
- Tolls and your toll transponder
- Roadside assistance plans
- A portion of your vehicle maintenance
- And more
One simple way to keep track of almost all of your driver expenses? Using a mileage tracking app like Stride! Stride tracks more than your mileage - it also helps you log expenses like car washes, subscriptions, and more. Download Stride here.
Filing Your Taxes
When it comes to filing your rideshare taxes, Uber and Lyft provide a lot of assistance so you don’t have to do it alone. Both companies have partnered with Turbo Tax to offer drivers a 50% discount.
Turbo Tax also has its own tax preparation checklist for drivers to use. You can also explore other online tax filing companies that will help walk you through the process and review your forms before they are submitted.
If you prefer to work with someone one-on-one, you can also consider hiring a rideshare CPA (Certified Public Accountant). A rideshare CPA can help you determine how much of your income you should set aside each month and help remind you about your quarterly estimated tax payments.
Rideshare taxes are easily demystified when you’re able to break down some of the key components so you know what you need and how the process works.
The key with doing taxes as a driver is to start preparing early. Make sure you’re tracking your income and expenses regularly. Also, be sure to take the time to explore your options when it comes to choosing the best tax filing software (like TurboTax, which many rideshare drivers swear by!), rideshare CPA, or other options to successfully file your taxes each year.
Harry Campbell is a former Boeing Aerospace Engineer and founder of TheRideshareGuy.com, a blog, podcast and Youtube channel for ridehail drivers and other gig workers and author of, The Rideshare Guide. Over the years, Harry has covered the gig economy industry closely and talked to tens of thousands of drivers and gig workers about their experience on the road.