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8 min read

    8 min read

    Doing your rideshare taxes doesn’t have to be complicated! For some rideshare drivers, your taxes may be as simple as a few forms. Today, full-time rideshare driver and RSG contributor Jay Cradeur shares how he files his rideshare taxes step-by-step. If you’d like to get the help of a recommended rideshare CPA, please click here.

    👉 Your two most important tools during tax season: Turbotax to file your taxes and a mileage tracking app to keep track of your miles! If you want to use a Turbotax alternative, then check out our FreeTaxUSA review.

    New Lyft Driver - Earn 1500:week

    I have watched many YouTube videos of Uber and Lyft drivers talking about how difficult it is to do your taxes as a rideshare driver. Many of these drivers seem to think that rideshare drivers pay more in taxes than a W-2 employee, but this is usually not the case.

    Note:  I am not a tax expert. You should definitely do your own due diligence before turning in your tax return. These are my practices, which I feel are conservative and fair.  

    Related: Rideshare Taxes for Uber and Lyft Drivers

    Over my sales career, I hired hundreds of independent contractors and one of my selling points was the value of the tax benefits of being an independent contractor. Even better for rideshare drivers, we can take advantage of a very generous mileage deduction, which, as you will see, can significantly reduce your tax burden.

    Interested in using TurboTax yourself? You can use my affiliate link to purchase your copy of TurboTax here.

    Today, full-time rideshare driver and RSG contributor Jay Cradeur shares how he files his rideshare taxes step-by-step

    Documents and Information You Need

    You will need to gather the following:

    Uber 1099-K document.  This is the document that will show you your gross earnings from driving.  By gross, this means everything that Uber charged your customers for the year.  Only drivers who made more than $20,000 in passenger/delivery payments and provided at least 200 rides/deliveries will receive a 1099-K.

    Uber 1099 Misc document.  This will show you how much you earned in bonuses.  This will include both your driving bonuses as well as any referral bonuses you may have earned. Only drivers/deliverers who received more than $600 or more of these payments will receive a 1099-MISC.

    Uber Tax Summary document.  This will show you many of the deductions, which you can take off of your combined gross revenue. This tax summary will have a breakdown of your annual earnings and business-related expenses.

    Note: in many cases, the Uber Tax Summary may be the only document you receive. The 2017 Uber Tax Summary will look like this:

    Tax summary ex

    Lyft 1099-K document. 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.

    Lyft 1099 Misc.  Only drivers who earned over $600 in bonuses, mentor rides, etc received one.

    The Last Item: List of your deductible expenses.

    You’ll want to make sure you’ve been tracking your mileage, whether you tracked it on an app, paper and pencil, or some other method. While your mileage is one deduction, there are others you may not be aware of, including:

    • Auto loan interest
    • Depreciation of your vehicle
    • Gas
    • Repairs for your rideshare vehicle
    • Washes/road service
    • Insurance

    Related: What Happens if I Forgot to Track My Mileage?

    You can write tolls and parking expenses off in addition to the standard mileage rate for your car, as long as they are a part of operating your rideshare business. You cannot write off tickets. For 2017, you can also write off up to 50% of the cost of meals you incurred while on the road.

    You’ll want to gather this information now, because it will be handy to have it near you as you file your taxes.

    Editor’s Note: We also recommend using QuickBooks Self-Employed to track your expenses, mileage, and business income in real time throughout the year. At the end of the year you can import those records to TurboTax. You can also “bundle” the two together and save a significant amount of money each year in the process.

    Related: How Much Does it Really Cost to Be a Rideshare Driver?

    The Process Using TurboTax

    I use a software program called TurboTax. I’ve also heard FreeTaxUSA is really good. I have used TurboTax for years because it is easy to use, is inexpensive and it does all the calculations for me.

    This service checks for errors, provides the tax return, and even does an audit check so you can feel comfortable about your return and the probability of getting an audit. Many people worry about getting an audit, so this feature helps to allay those fears.

    Related: How to Set Up QuickBooks for Rideshare

    First Step – Enter Your Gross Revenue

    You will enter all your gross revenue.  In TurboTax, you will enter both of your 1099 Misc figures separately, and on another screen, you will add your 1099 K figures, with Uber and Lyft added up together.

    In this example, my total gross revenue is just over $126,000 for 2016.

    Second Step – Enter your Mileage and Car Deductions

    TurboTax will ask you to enter the number of miles you drove in total in 2016, and how many of those miles were for business. You may be using an app to keep track of your mileage. If that is the case, you know your numbers. If not, then you need to make a best estimate based on your driving history.

    In 2016, I drove for business 48 weeks out of the year. Each day, I drove an average of 250 miles. I drove, on average, 6 days per week.  If you do the math, that translates to 72,000 business miles.  You can also deduct tolls and parking that did not occur on an Uber or Lyft ride, as well as interest on your car payment.

    Step 3 – Enter Your Other Deductions

    As an independent contractor, you can deduct many things from your gross revenue. The first deduction will come directly from Uber and Lyft’s documentation. These are items that were included in the gross revenue figure, but were not actually paid to you.

    • Split Fare Fees
    • Safe Rides Fees
    • Misc Fare Fee
    • Airport Fee
    • Uber Service Fee (This is the 20% or 25% that Uber deducts.)
    • Lyft Service Fee (This is the 20% or 25% that Lyft deducts.)
    • Lyft Tolls

    Here is a list of other possible deductions you can take:

    • Tolls – These are tolls that occurred while driving without a passenger in your car.
    • Advertising – Do you have a website to attract referral fee candidates?  What did it cost to create the website, order the url, etc?
    • Hosting – What does it cost to host the website?
    • Supplies – This could include gum, water, phone holder, pepper spray, tissue, rags, etc.
    • Utilities – This could include your cell phone and the monthly fee. If you use your phone 90% for business, then report 90% of the annual total.
    • Services – I use Spotify, AWeber for an email list, and Teachable to host my videos.
    • Vehicle Maintenance – This is for car washes, which you can deduct even if you use the mileage deduction.

    TurboTax allows you to classify each deduction, or you can simply type them under Other Expenses.  It looks like this:

    Step 4 – Check For Errors, Audit Check, Print and File

    TurboTax will tell you if they see any errors, and give you the opportunity to fix those errors.  Then you can conduct an audit check and see if anything you have input will cause any red flags.

    As you can see, this return has a very low chance of an audit.  Of course, you will also need to write a check for the amount of the tax due. Ideally, you have been putting aside some of your earnings each month to cover the tax. Time to pay the man!

    To calculate your Federal Tax Rate, you’ll take your gross income and your taxable income then calculate your effective tax rate based on that.

    For example, you make $100,000 in one year. Your deductions come to $80,000, which means your taxable income is $20,000. In this example, let’s say you owe $2,000 in taxes. Taking what you owe in taxes ($2,000) and dividing it by your taxable income ($20,000) = .10, meaning your effective tax rate would be 10%.

    In the scenario above, I took the federal tax due ($10,115) and divided it by my total taxable income ($94,897). In my scenario, my federal effective tax rate is 10.7% ($10,115 / $94,897).

    Summary

    As you can see, with all the deductions, rideshare drivers pay the same as or often  less than salaried employees of a company. We do need to do a bit of extra work at tax time, and we do need to have some of our money saved up.

    For me, the freedom and flexibility and tax saving make this rideshare gig worth it. Again, if you have any questions, be sure to check with a tax expert. You want to feel confident in your numbers.

    Also, you can certainly be more aggressive with your deductions. However, I have learned (from going through a 5 year tax audit in 2004) that it is better for me to be conservative and feel good about paying my fair share.

    Need a tax expert? We recommend finding someone knowledgable in small business and/or rideshare drivers. We’ve partnered with Starzyk CPA to offer a special deal for RSG readers, and if you’re interested in these services, please fill out this form.

    Interested in using TurboTax yourself? You can use my affiliate link to purchase your copy of TurboTax here.

    Readers, how do you normally do your taxes? Any suggestions we missed?

    -Jay @ RSG

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    Additional Resources

    Jay Cradeur

    Jay Cradeur

    Jay Cradeur, a graduate of UC Berkeley, is a full-time driver with 24,000 rides. Jay’s mission is “Work. Travel. Joy.” Jay has a new podcast: Rideshare Dojo with Jay Cradeur. You may want to check it out and even be a guest. There are lots of Videos and Tips too. Visit www.ridesharedojo.com and see all that Jay is up to.

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