👉 Tip: the most important tools during tax season are TurboTax to file your taxes and a mileage tracking app to keep track of your miles! And if you want to use a Turbotax alternative, then check out our FreeTaxUSA review.
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 2019 taxes (the taxes you will file this year) and there are a few noticeable changes from 2018 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.
New for 2019:
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. The information shown on the Uber Tax Summary is your number of completed trips along with your total online miles (not hours). It also breaks down your gross earnings plus your total additional earnings (including in-app tips); your expenses, fees and taxes (that Uber tracks — not including your personal expenses such as gas, maintenance, etc.); and your net payout which would be the amount that was deposited into your bank account each week (or through cashing out) throughout the year.
When will you receive your Uber tax summary in 2020? According to Uber, “You’ll receive an Uber tax summary on your driver dashboard before January 31, 2020.” If you haven’t received it by then, contact Uber.
Below is an example of what this will look like in 2019:
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.
For 2019 taxes, 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.
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?
The Lyft Tax Summary is very similar. They do outline at the top when and if you can expect a 1099-K and/or 1099-M: “If you received over $20,000 in gross ride earnings you will also receive a 1099-K by January, 31st 2020. If you received over $600 in non-ride related earnings you will also receive a 1099-M by January 31st, 2020.”
If you earned less than that, you still need to report your earnings as outlined on your tax summary, but you will not be getting an official tax document from Uber or Lyft. If you drove very infrequently, you may need to hunt on the app for your tax summary instead of receiving an email with the information.
Both breakdown what the expenses section covers of what they are reporting, namely the booking fee, airport fees, instant pay or express pay charges, and service fees that Uber and Lyft take out of your earnings upfront.
Lyft includes a Tax Prep Checklist that can come in handy if you’re not sure what you can deduct from your rideshare earnings:
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”.
Lyft is also offering deals with TurboTax:
It would be a good idea to research the two to see if you’re getting the best deal, though it’s likely they will both be offering the same discounts. Learn more about discounts and other tax questions you might have at Lyft’s Tax Site. Lyft is also offering additional support at their local hubs. Find your nearest hub here.
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.
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 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.
New for 2019 Rideshare Tax Filing
Something new to look out for with the 2019 filing is the updated inflation-adjusted 2019 tax brackets, which look like this:
Your tax bracket may have changed from 2018 to 2019 even if you’re earning the same amount this year that you did last year.
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 $0.58/mile
The 2019 standard mileage rate is 58 cents per mile for business uses, which is up from the 54.5 cents from 2018. Keep in mind, you can only do the standard mileage deduction or the actual expenses; you cannot do both.
Keep in mind, if you chose to deduct your actual expenses the first year you owned your vehicle, you must continue to deduct your actual expenses, even if you’d get a better deal with the standard mileage deduction. On the other hand, If you chose the standard mileage deduction the first year you owned your vehicle, then you can choose which deduction you want to take each of the following years until you no longer own it.
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 2019, the standard mileage rate is 58 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 58 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 $580 deduction each week or $30,160 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.
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 you can fill out this form to be connected to one.
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 recent 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 2020 IRS code for Uber and Lyft drivers?
The IRS code for Uber, Lyft, and other rideshare drivers is: 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.
How can I pay less in taxes? (legally, of course!)
Looking to reduce your taxable income? You’re not the only one! We have an article on how Jay made $120K as an Uber driver and only paid $4k in taxes here.
What About 2020 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!
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
- Review of FreeTaxUSA tax filing software
- 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
- How I Made $120k as an Uber driver and only paid $4k in taxes
- Best apps for Uber drivers
- Mileage tracking apps for Uber Drivers
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