Lyft and Uber Driver Tax Guide
How are Lyft and Uber Drivers Taxed?
So you started driving for a ridesharing service. Every month you receive checks, but there are no taxes withheld. How are you taxed then? See below for Lyft and Uber Driver Tax information!
As a practicing tax accountant, I am asked this question all the time by current drivers. Where do I report the income and what expenses am I allowed to deduct. Most of the time the drivers don’t even know that you are allowed to take certain deductions against the income reported to you. While we won’t cover everything here, you should have a good understanding after reading this post on how to report your income/expenses and where to look if you have more questions if you may have any.
For starters, companies like Uber and Lyft do not treat the drivers as employees. So instead of receiving a W-2 at the end of the year, they will issue you a 1099-MISC (see below).
Box 7 (Nonemployee Compensation) will show the amount you earned throughout the year. This is the amount which will be reported on your tax return. While you can just report this on the other income line on page 1 of Form 1040, you will want to report this on Schedule C for businesses. You will want to do this so that you can deduct expenses against the income.
So what expenses are we allowed to deduct? The IRS gives us two methods for determining the allowed expenses for your car. The standard mileage rate or actual expenses.
Standard Mileage Rate: The standard mileage rate is determined annually and you are allowed to multiply this by your total miles driven while on the job. You should be able to pull this information within your account. One thing to note, if you use the standard mileage rate for a year, you cannot deduct your actual expenses for that year. This includes depreciation, lease payments, maintenance and repairs, gasoline, oil, insurance, or vehicle registration fees.
Actual Expenses: These are items that are listed above as not allowed if you use the standard mileage rate.
As with anything tax related, there are always exceptions and special rules, so I would recommend reading through IRS Publication 463 prior to filing you taxes.
Your net income will be subject to self-employment taxes so it is worth your time to report expenses to offset some of your driving income.