One of the things a lot of new drivers overlook when they’re just getting started is taxes. Taxes as an independent contractor might seem scary, but they’re actually pretty simple. Today, we’re going to answer all the questions you may have to make sure you maximize your deductions and minimize your taxes paid.
The info below is all relevant for filing your 2017 taxes – this means the GOP Tax Plan will not affect your taxes this year, but they may next year. For more information on the new tax plan (which takes effect for 2018 taxes), check out our article “How the New GOP Tax Bill Affects Rideshare Drivers” here.
Every year by the end of January, Uber and Lyft send out 1099s for the prior tax year that detail how much you made, what fees they took out and the miles you drove. And since drivers are independent contractors, all that means for your taxes is that you’ll have to file a Schedule C in addition to your 1040. This year they cut it pretty close and sent out 1099 info on Jan. 31, 2017!
So let’s get started and see how to file your taxes as a rideshare driver.
1099-K vs 1099-Misc
Uber and Lyft both consider themselves third party payment processors. I’m familiar with this term because I used to accept Paypal payments with one of my old businesses, and only in years where I made over $20,000 and did 200 transactions would I receive a 1099-K.
A third party payment processor is essentially a company that facilitates payments between consumers and business owners. So that’s why you see companies like Paypal, Amazon Payments and Square label themselves as third party payment processors.
Now obviously Lyft and Uber do a whole lot more than facilitate payments, but this is the distinction they’ve decided to go with. This won’t affect the amount you pay in taxes, but it does mean they’ll report gross income and you will have to subtract out the fees/commissions they charge.
New for 2018:
You may receive these tax documents from Uber:
- A tax summary: an unofficial document produced by Uber and provided to every driver/deliverer. This tax summary will have a breakdown of your annual earnings and business-related expenses that may be deductible.
- 1099-K: An official IRS tax document that includes all on-trip gross earnings. Only drivers who made more than $20,000 in passenger/delivery payments and provided at least 200 rides/deliveries will receive a 1099-K.
- 1099-MISC: An official IRS tax document that shows a breakdown of promotion, referral and other payments for the year. Only drivers/deliverers who received more than $600 or more of these payments will receive a 1099-MISC.
New this year is Uber’s tax summary, which all drivers will receive. Below is an example of the tax summary you’ll receive, and you’ll notice that the tax summary now shows your total online miles. This means miles waiting for a trip, miles on your way to pick up a passenger/UberEATS order, and on trip miles. This is different from last year, when Uber’s statement only showed on trip miles.
In addition, the tax summary also breaks down your expenses, fees, and tax. This part will show you potential tax deductions.
Now where it gets confusing is with the 1099-K, since Uber reports gross fares including all of their fees/tolls/etc. All you need to do though is combine the number on your 1099-K and/or 1099-Misc, and that is the total that will go down as your income on your Schedule C.
Now I know what you’re thinking. That number is a lot higher than what you actually made, and you’re 100% right. In order to get your true earnings, you will want to subtract all of the expenses, fees and tax (you can find your tax summary here on the Partners Platform).
Also new in 2018, Uber is now offering a taxes FAQ page you can access here.
Lyft handled their 1099-MISC the exact same way as Uber: drivers who earned over $600 in bonuses, mentor rides, etc received one. Unlike Uber, Lyft will be sending a 1099-K to all drivers who earned at least $600 in gross ride receipts. So if you did not meet that threshold, you will not receive a 1099-K.
But remember, regardless of whether you get a 1099 or not, you still have to pay taxes on all the money you earned. In order to correctly report your income, you’ll need to head over to log in to your Driver Dashboard and click “Tax Information”. There you’ll see your gross ride earnings, Lyft commission and in ride miles/out of ride miles. You can add the two mileage numbers together to get your total ‘online mileage’ which would be similar to the number Uber provides.
To print out your Lyft 1099 forms, visit your driver dashboard here and click to “Tax Information”.
Driving For Lyft And Uber
If you’ve been following my advice over the past year, you probably drove for more than one TNC last year. If that’s the case, you still only have to file one Schedule C, but you will need to combine the income from Lyft and Uber on your Schedule C and combine the commission and fees from Lyft and Uber too. Just make sure you account for the correct expenses as detailed above.
Since Uber and Lyft are all considered the same ‘rideshare driving business’, you only need to fill out one Schedule C. If you also did delivery, technically you’re supposed to do a separate Schedule C but I’d speak to a CPA about that. You could probably argue that since Uber now offers UberEats for example, your business is really more providing ‘logistic services’ than rideshare or delivery type services.
Standard Mileage Rate
We’ve talked about standard mileage rate vs actual expense method before but for most of you, the standard mileage rate will likely make more financial sense (and it will be a lot easier). Just note that if you opt for the standard mileage rate, you must choose to use that in the first year the car is used as a business. In later years, you can then choose either method.
For 2017, the standard mileage rate is 53.5 cents per mile and that basically includes all of the costs to operate your vehicle: gas, depreciation, oil changes, maintenance, repairs, etc.
Remember, the actual cost to own and operate your vehicle is not 53.5 cents per mile though. That is the deduction amount that you will get from the IRS. Your actual cost should be a whole lot less, especially if you want to be profitable as a rideshare driver.
Uber provides the total number of miles you drove while online in your tax summary and Lyft provides the total number of on trip and off trip miles while online (which you can combine to get your total miles driven while online). You can use this number but it may not include all of your deductible miles.
Documentation and records are extremely important when it comes to filing your taxes. If you find it difficult to keep records, I recommend using one of these mileage trackers (some of the mileage trackers here also help you track car washes, health care, and more!)
If you’re only going to track one thing, make sure you are tracking your miles! A full-time rideshare driver will easily put 1,000 miles a week on their car which translates into a $535 deduction each week or $27,820 through the year (which is pretty massive).
There’s some confusion around which miles you can deduct as a driver, but personally, I deduct all the miles from the second I leave my house until I arrive home. Especially now that you can turn on the destination filter if you commute in/out of the city.
Even though Uber does show all miles online now, it’s not a substitute for a proper mileage log. You’ll still want to consider using a third party mileage tracking app like Stride Drive or QuickBooks Self-Employed. You can find a full list of mileage tracking apps here.
- Other expenses like car washes, cell phone use, candy/water/etc, Spotify membership, Bluetooth, Trunk Organizers, etc may be deductible too as long as they are ‘ordinary and necessary‘.
- The only thing you’ll need to watch out for with deductions is a cell phone that may be used for personal and business use. Generally, you will need to allocate between personal/business use, so if you use the phone 50% of the time for business and 50% of the time for personal, then you would only be able to deduct half of the cost of the phone and monthly subscription.
- Here’s a good resource from Starzyk CPA if you want to learn about some more tax deductible expenses: Everything You Need To Know About Rideshare Taxes. And if you’d like to hire Joe, please click here to fill out an inquiry form.
How Do Most Drivers File Their Taxes?
If you’re wondering what your fellow drivers do when they file their taxes, here are the responses from a survey I sent out at the beginning of the year:
Hiring a Rideshare CPA
If you’re going to go the CPA route, I recommend you find someone who’s knowledgeable in small business and/or rideshare drivers. There are hundreds of thousands of rideshare drivers these days, so it shouldn’t be too hard to find a CPA who is familiar with Uber.
A lot of you have asked for my recommendations for a rideshare CPA, and I’ve partnered with Starzyk CPA to offer a special deal for RSG readers. If you’re interested in using Joe’s services, please fill out this form.
Using Tax Software
TurboTax/QuickBooks Self-Employed Bundle
I’ve always been a fan of TurboTax software, and since Uber and Lyft drivers have 1099 income, you’ll need to go with the TurboTax Self-Employed edition. They’re also offering a deal where you can get the QuickBooks Self-Employed (QBSE) Tax Bundle, which combines QBSE with TurboTax Self-Employed. That way, you can just export all of your ridesharing deductions from QBSE directly into TurboTax vs. starting from scratch.
If you don’t want the bundle and just want to get TurboTax, please consider using my affiliate link and I will get a small cut out of any purchase you make.
H&R Block Online Software
I haven’t ever used H&R Block for my taxes, but I do have several friends who use the software and find that it’s very similar to TurboTax but at a lower price point. H&R Block also has all of the same auto-import features and both services can actually import each other’s returns from prior years so switching shouldn’t be much of a hassle.
If you end up using H&R Block for your taxes, please consider using my affiliate link and I will get a small cut out of any purchase you make.
Frequently Asked Questions
Why is the amount on my 1099-K from Uber higher than what I earned last year?
Since Uber considers themselves a third party payment processor, the amount shown on your 1099-K is going to include the amount you earned plus Uber’s commission, tolls, etc. Uber will provide you an amount for “expenses, fees, and taxes” but double check with your own records to be sure that’s the correct amount.
Why didn’t Uber or Lyft send me a 1099? How can I do my taxes without a 1099?
If you made less than $20,000 and 200 rides, you won’t receive a 1099-K from Lyft or Uber. You still need to pay taxes on the money you made though, so head to your Uber or Lyft summary page and get the info you need there to do your taxes.
Uber will also send all drivers a tax summary, and that will help you when you file your taxes.
What is the business code for Uber and Lyft for my Schedule C?
For Uber & Lyft use: 485300 Taxi & Limousine Service
Business codes are used by the IRS to categorize your business for statistical purposes only. The code you enter will not affect the outcome of your tax return.
What if I’m renting a car to drive for Uber or Lyft?
If you’re renting a car from a program like Lyft’s Express Drive, then you can not take the standard mileage deduction. Instead, you’ll need to deduct your weekly rental payments and allocate your percentage of personal and business use (you’ll need to track your miles in order to be able to do this though).
Why did I get two 1099-K’s from Uber?
Some drivers received two 1099-K’s this year and if that’s the case, you’ll need to combine the income from both and add it to your Schedule C.
What About 2018 Taxes? How Can I Prepare for Those?
First, make sure your tracking your mileage and your expenses (like car washes, repairs to your car – all those deductions we’ve mentioned above). Accurate record-keeping makes tax filing so much easier!
As far as 2018 taxes, Starzyk CPA recommends,
There really isn’t anything different that drivers have to do. Many will benefit from a tax cut simply by going about their business as normal. It’s correct that all of the individual tax breaks are scheduled to expire. I think there will be strong pressure to keep the pass-through deduction in place in some fashion in the future. Without it, the disparity between corporations and pass-through entities would be too large.
Readers, do you now have everything you need to go out and do your own taxes? Are there any tax questions you still have or things I missed?
Disclaimer: This article is meant for informational purposes only! You should talk to a CPA about your own individual tax situation or pay a licensed professional.
-Harry @ RSG
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