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.
This guide is going to help you with your 2018 taxes (the taxes you will file this year) and there are a few noticeable changes from 2017 so pay attention!
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.
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.
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New for 2018:
You should 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.
Similar to last year, all Uber drivers will receive a tax summary. Below is an example of the tax summary you’ll receive, and you’ll notice that the tax summary 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.
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). Uber breaks this out for you in the tax summary (image above). Uber is also offering a taxes FAQ page you can access here.
New for 2018, Uber is continuing its partnership with TurboTax. TurboTax will be offering free and discounted services to drivers and delivery partners. You can find out more here.
Drivers will also have the opportunity through TurboTax to sign in to live webinars to hear from TurboTax pros and ask questions. Additionally, select cities will have in-person support from the TurboTax team in their local Greenlight Hub.
- From now until 2/28/19 (11:59pm PT), sign up to file your 2018 federal and state returns online for free with TurboTax Self-Employed or 50% off TurboTax Live Self-Employed.
- Between 3/1/19 and 4/15/19 (11:59pm PT), sign up to file your 2018 federal returns online for free with TurboTax Self-Employed or 50% off TurboTax Live Self-Employed (state not included after 2/28/19).
Offers must be accessed through the Tax Information tab on partners.uber.com.
Can’t make it to one of the webinars? Subscribe to our YouTube channel to be notified of our next YouTube live. We’ll be tackling all of your questions related to rideshare taxes, filing, deductions and more. Subscribing to the RSG YouTube channel is easy – just click here.
All set to file? Click here to purchase H&R Block on Amazon.
Lyft handled their 1099-MISC the exact same way as Uber: drivers who earned over $600 in bonuses, weekly guarantees, etc. received one. Lyft will be sending a 1099-K to all drivers who earned at least $20,000 in gross ride receipts and gave at least 200 rides. This is different from last year! So if you did not meet that threshold, you will not receive a 1099-K.
Note: If you are a resident of Vermont or Massachusetts, you will need to have earned $600 in gross ride receipts during the year. There is no number of rides requirement for residents of these states either.
To print out your Lyft 1099 forms, visit your driver dashboard here and click to “Tax Information”.
Like Uber, Lyft also has partnered with TurboTax to offer drivers some cool incentives. If you gave 10 or more rides within a 3 month period, Lyft drivers can get access to TurboTax Self-Employed for free and TurboTax Live Self-Employed for less than $100.
Related article: Essential gear for rideshare drivers
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.
New Changes in 2018
The 2018 Tax Cuts and Jobs Act brought on many major changes to both business and personal income taxes. Rideshare drivers are affected mostly by the business changes since driving for apps like Lyft and Uber is treated as independent contractor work. Here are some things to pay attention to.
The New 20% Pass-Through Deduction
This is meant to give small business owners a boost. That includes freelancers and self-employed people like rideshare drivers who usually receive a 1099. It’s one of the biggest changes for rideshare drivers during the 2018 tax year.
If your income is less than $157,500 for the year ($315,000 if married filing jointly), you can get a deduction worth up to 20% of your total profit.
For example, if you earned $35,000 in fares and your rideshare business expenses were $9,000, your profit (you pay income taxes on the profit) is $26,000. However, there is one calculation to keep in mind.
A note from Starzyk CPA:
There is actually one big item that affects the calculation. It’s no longer simply 20% of business profit. Drivers would take their net profit and subtract their deduction for 1/2 self-employment tax (and self-employed health insurance and retirement plan contributions if they apply) and then multiply that number by 20% to figure the deduction.To follow your example:Driver has profit of $26,000. The self-employed tax deduction for this amount of profit would be $1,837. The pass-through deduction would be $26,000 – $1,837 = $24,163 * 20% = $4832.60 which is a bit lower than the $5,200 reported now.
This means you would have a taxable income of $21,167.
What If I Only Drive Part-Time?
If you’re doing rideshare part-time on top of another job, this deduction also only applies to your rideshare income (and any other “gig work” on a 1099) and not the wages from your job. So, if you make $50,000 a year at a job that you get a W-2 from plus $5,000 from rideshare driving, then you’d get an additional deduction of $1,000.
Standard Mileage Deduction Increases to $0.545/mile
Every year the IRS releases what the official deduction per mile will be for the upcoming tax year. For tax year 2018, it went up a cent to $0.545 per mile. Even though it sounds like an increase of a penny isn’t much, it translates to an extra $500 in deductions for someone who puts 50,000 business miles on their car.
For 2019, the mileage reimbursement rate is going up to 58 cents per mile so make sure you do a good job tracking those miles. We recommend Stride Tax (affiliate link).
Rideshare apps give luxury car drivers the option to earn more money. In addition to normal depreciation, luxury cars now have bonus depreciation because of the new tax bill. If you own or lease a luxury car, now you can deduct $10,000 plus $8,000 of bonus depreciation if eligible (maximum possible total of $18,000) in the year you first start using it for ridesharing and $16,000 in the second year.
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 2018, the standard mileage rate is 54.5 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 54.5 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 and Lyft provide the total number of miles you drove while online in your tax summary. You can use this number but it may not include all of your deductible miles if you are doing business related activities with the app off (driving to driver meet ups, re-positioning with the app off, commuting, etc). And additionally, if you drive for both Uber and Lyft at the same time, you’ll want a separate mileage tracking app otherwise you have to break down all your miles to make sure you don’t count any periods twice (since there are times where you’ll be online without a Lyft or Uber passenger)
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 $545 deduction each week or $28,340 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 and Lyft both show all miles online now, it’s not a substitute for a proper IRS approved mileage log. You’ll still want to consider using a third party mileage tracking app like Stride Tax. You can find a full list of mileage tracking apps here.
- Training materials and tools like Maximum Ridesharing Profits (our video course), The Rideshare Guide (our book), Mystro, etc are all deductible.
- 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:
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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.
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
Can I deduct all my online miles?
One thing all CPAs agree on is that you can deduct all the miles while you have a passenger in your vehicle (Period 3) or are driving to pick up a passenger after you’ve accepted a request (Period 2). But I personally also deduct all the miles I drive during Period 1, which is when I have the app on and am waiting for a ride request. These miles could be when I’m moving to a location with a better chance of getting a ride or even have the destination filter on. I also deduct all the miles I drive when I’m offline but still working: ie driving to meet up for lunch to talk shop with other drivers, driving to Best Buy to get a new dash cam, etc.
Mileage is a huge deduction and there are really a number of ways you can rack up the miles to maximize your deduction. I recommend using Stride Tax to track your miles as it’s a free app for iPhone and Android and the reports from Uber and Lyft will not give you all of your deductible miles.
I forgot to track my mileage! What can I do?
First of all, don’t panic! Many drivers have faced the same situation of not completely tracking their business miles or simply not knowing what to track. Fortunately, rideshare drivers are in a good place when it comes to finding extra evidence. Since Uber, Lyft, and other rideshare companies keep pretty thorough records of your activity, rideshare drivers have access to more corroborating evidence than most independent contractors.
What about health insurance?
Thank you to reader Paul for this information:
The new tax law provides ride share drivers, and other self-employed folks, with 2 new opportunities to reduce taxes:
- Qualified Business Income (QBI) — line 9 on the new 1040, a reduction to taxable self-employment income
- Self Employment Health Insurance Deduction — line 29, schedule 1 “Additional Income and Adjustments to Income.”
I expect few self employed people are aware that they can deduct health insurance as a business expense and reduce taxes.
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?
Didn’t get a 1099 from Uber? 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 2019 Taxes? How Can I Prepare for Those?
First, make sure you’re 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 2019 taxes, Starzyk CPA recommends,
“Drivers will continue to benefit from the lower tax rates and the 20% qualified business deduction going into 2019. The Tax Cuts and Jobs Act is currently not set to expire until the year 2026. Also good news for any drivers without health insurance, the penalty for not having minimum essential coverage will be gone starting in 2019. There are currently no major changes that affect how a driver should track their mileage and expenses.”
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
- Everything Uber Drivers should know about filing taxes
- Top rideshare tax questions answered
- TurboTax Self-Employed for Uber Drivers
- How to file your taxes using TurboTax
- How to use Quickbooks self-employed
- Changes in taxes for Uber drivers
- How GOP Tax Bill affects Uber Drivers
- How to do your Uber taxes (Youtube video)
- Guide to Uber Tax Deductions (Podcast)
- 6 tax deductions for rideshare drivers
- How to determine standard mileage vs. actual vehicle expenses
- Best apps for Uber drivers
- Mileage tracking apps for Uber Drivers
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