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RSG003: Every Rideshare Driver’s Tax Deduction Guide

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The two questions I’ve gotten most since starting this site a couple months ago have been about insurance issues and taxes.  Well I covered insurance in Episode 2 and even though it took a lot out of me I’m back for more.  Taxes are probably one of the most overlooked parts of rideshare driving because you don’t have to worry about them until April every year.

New Lyft Driver - Earn 1500:week

Since I have experience with starting my own businesses and working as a 1099 employee, a lot of the same tax principles that apply there also apply to rideshare taxes.  Since rideshare drivers are self-employed and paid via a 1099, most drivers may not even realize that they now need to file a Schedule C as a sole proprietor when they do their taxes.  If that last sentence confused you, then this podcast is for you.  And even if it didn’t, there is still a lot of great information in there that can help you with your taxes

Taxes can be confusing and convoluted but I tried to really break it down into layman’s terms and tell you exactly what I plan on doing and why.  If you have any follow-up questions feel free to leave them in the comments section or send me an e-mail.  I’ve gotten great feedback so far on the first two podcasts and it has really inspired me to make sure that I am putting out some epic content.  As of 7/7/14, the first episode has been downloaded 422 times and the second episode has been downloaded 445 times.

By the way, if you like what you hear, I encourage you to subscribe to the podcast on iTunes or Stitcher.

Summary of the Show:

Intro

  • I’m getting married but I’m still working
  • My Travel Hacking
  • Disclaimer

Lyft and Uber’s Policies Toward Taxes

  • Lyft and Uber don’t provide much help when it comes to taxes
  • How do 1099’s work?
  • 1099 vs W2 and how it affects tax payments
  • Schedule C for a Sole Proprietorship
  • Definition of a Business
  • The $600 1099 myth
  • Lyft and Uber are classified as online payment providers
  • Will you get a 1099?

How Do Estimated Tax Payments Work?

  • When and why do you have to file estimated tax payments?
  • 1040 ES
  • Always file your taxes!
  • Strategies for W2 & 1099 employees to avoid estimated tax payments

Deductions for Rideshare Drivers

  • Deductible business expenses
  • Deduction vs. credit
  • Marginal tax bracket
  • Why rideshare is great for high income/low income spouses
  • Actual mileage vs Actual Expenses
  • Personal vs. business use of your vehicle

How to Maximize Your Mileage Deduction

  • What mileage is deductible?
  • Can you deduct miles when there are no passengers in your car?
  • What I learned from my rental property taxes that applies to rideshare taxes

The Best App to Track Your Mileage & Expenses

  • Business owners have to do a lot more work when it comes to record-keeping
  • Take pictures of your receipts, start/stop your trips and more with this app

Outro

  • Taxes are boring but you need to at least understand the basics whether you go to a CPA or not
  • If you do hire a CPA, find one who specializes in rideshare taxes and/or small businesses
  • Nobody cares more about your money than you do
  • I will deduct every penny that I’m entitled to
  • Subscribe to our e-mail list!
  • Please leave a review on iTunes or Stitcher if you enjoyed the podcast

Show Notes:

Thank You For Listening!

Quick Disclaimer: I am not a tax professional, this podcast is for informational purposes only. You should not take what I say as fact and any information provided in this podcast is solely applicable to my personal tax situation and not yours. Any correspondence between you and I does not create an advisory, fiduciary or professional services relationship.

If you’d like to get Rideshare Guy Podcasts delivered straight to your phone or mobile device, you can subscribe via iTunes or Stitcher.  Alternatively, if you’d like to be notified via e-mail every time we publish a new article or podcast, please subscribe to the e-mail list here.

And I would really appreciate if you’d leave a review on iTunes and help the podcast reach more people.  I make sure to read each and every one of the reviews so if you leave a review, please let me know so I can personally thank you.

And lastly, if you have any questions, comments or concerns don’t hesitate to reach out to me.

After hearing all of the information in the podcast, is there anything you’re still confused about when it comes to rideshare taxes?  Do you plan on doing your taxes yourself or hiring a CPA to do them for you?

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-The Rideshare Guy

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Harry Campbell

I'm Harry, the owner and founder of The Rideshare Guy Blog and Podcast. I used to be a full-time engineer but now I'm a rideshare blogger! I write about my experience driving for Uber, Lyft, and other services and my goal is to help drivers earn more money by working smarter, not harder.
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  • Elizabeth Dobson

    Loved this. I have my own design business on the side, and sadly, I have never really understood how deductions truly work. So thanks for dummy proofing this podcast!!! Also, smart on paying estimated taxes through the day job….I like the idea of having it feel like Xmas and getting money back at the end of the year 🙂

    So with the whole car thing, I have a 2005 Acura TL. It’s paid off, but I have about 220k miles on it. I am unsure whether keeping it and putting money into it when things die (I.e. probably a new transmission in about 20-30k miles) is a better idea (I feel it is, because no car payments are beautiful). However, I had a boss who was super tax savvy, and he’d buy a new suburban every few years, depending on tax credits for things like energy efficiency vehicles, low mileage, and all the crap I dont understand. So what’s your take on a paid off car, vs whatever deductions can be claimed for a new car, especially if using for TNC?

    Can girls deduct makeup and personal care products? I mean, we have to look presentable, right?? Lol.

    Also, I got a new phone this week and totally forgot to backup my expense tracker app. Daaaaaang it!!!! Lol thanks for the reminder. Haha

    • Thanks Elizabeth, yea to be honest it can be quite confusing. I would much rather get money back at the end of the year since I have no problem just putting it into savings.

      In my experience, deductions rarely outweigh the interest savings of just buying a car outright with cash. I hear this argument with real estate a lot when people tell me how much they’re saving in mortgage interest deduction by buying a house. True you may be getting a bigger deduction but a deduction may only be worth 30 cents on the dollar while you’re paying 70 cents in interest.

      If I was a girl, I wouldn’t deduct make-up and things like that but I’m sure people have tried haha.

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  • Derek Rutledge

    Thank you for all this information. Hope you’ve had a great honeymoon!

    I just have a question about keeping records. Is it enough to write the mileage down when I begin driving, then write the mileage down when I finish? Do I need more documentation?

    Also will I need to separate miles between Lyft and Uber (seemingly impossible), or will I deduct all mileage on my Schedule C?

    • Hi Derek, yea it was a great time, thanks! I reset the trip odometer as soon as I get into my car and once I’m done i record the mileage into a simple spreadsheet with the date and miles driven – that’s it. I just found a really cool free device that may work perfectly for this though. Stay tuned for my review 🙂

      If you wanted to be safe, you could separate the miles but I don’t see how the IRS could reasonably expect someone to do that. I’m going to just keep track of all the miles I drive since they could potentially be for any of the services (ie what service would you deduct driving without a passenger miles to?).

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  • Nathan Swift

    Hey this was super helpful thanks (sorry i’m late to the party!). What I’m still unsure of is that if I’m not going to receive a 1099 from Lyft (and I won’t because I didn’t drive that much last year), won’t the IRS still require some sort of documentation to prove that I made the amount of money I say that I did? This is my first job where I won’t have documentation to submit, and in the past I’ve always had to include a copy of either my 1099 or W2 with my tax return. How does this work?

    Also, the “history” page on Lyft doesn’t work for me, so the only way I can see how much money I made last year is from adding up all my weekly email summaries. Is that adequate proof?

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  • Stephanie Davids

    I will use some of thees tips when filing next year. I wish I would have found this sooner!

  • Kirk Peebles

    I have searched the web and your name comes up the most. Your post are also the most helpful, even several years later. I’ve been on top of keeping track of miles and tried several apps to help me. My question, from your experience with filing, how much information does the IRS need on the trips? Do they have to be broken down by rides and do they have to show the destination of each trip. I know to most this seems like nothing to be worried about, but I’m new to any rideshare and the last thing I want to do is lose money on a side job because of taxes. Thanks for any help.

    • Haha well thanks 🙂 For mileage tracking, you don’t need detailed trip data but you do need to record either the start/stop mileage on your odometer or something that keeps a record of the total trips during any given rideshare driving session. Make sense?

      There are a lot of free apps that will help though, Stride Drive is a good one that is free if you’re on iOS: therideshareguy.com/go/stride

      • Kirk Peebles

        Yep, that is exactly what I needed. I’ll just make sure to note my total trip with trips I took after I get home. Most apps groups the entire trip together anyway, so this makes it easy. Most apps also keep the odometer reading after you put it in to track your rides. Thanks again for the help!

  • jason

    I know a little tax information about your standard taxes but never knew anything on ride sharing and that was one of the biggest reasons i stayed cleared of driving for myself or should i say uber/lyft , the information you shared has done more than answered the questions that i have had so on that note I thank you…. keep up the helpful work and again thank you

    • Great glad to hear that, we’ve got lots of updated info in our guide here too: therideshareguy.com/all-of-your-2014-rideshare-tax-questions-answered-a-turbotax-giveaway/

  • thomasah

    I’ve just got the 1099K statements from Uber and Lyft. It looks like they both include all monies collected for your rides: Fare + tolls + booking? + tips +bonus+and other amounts paid to you..
    I keep a record of all payments by Uber and Lyft, along with tolls and tips and the Uber/Lyft commissions.
    For 2016 Uber overstated my income by about $3000 and Lyft by about $150. I’m guessing that Uber includes their booking fee as part of the 1099k. I can get fairly close if I calculate the booking fee and subtract it from the 1099K amount and then subtract the toll charges, then take the result and multiply by .78 (average percentage because UberXL).
    For those that are using Uber’s 1099K amount as their payments, they needs to deduct tolls and the booking fees, multiplied by the number of trips, and then multiple by .75. Or go through the statements and add them up,or go through the earnings section on the app and swipe to the right to get previous weekly earnings. I takes some time to do this if you haven’t kept your records up to date. If this isn’t done, you could be paying a lot in unnecessary taxes.

    • So Uber reports gross income on your 1099-K but if you use their tax summary, you can deduct all the tolls/fees/commissions in order to get your net income. Here’s how to do it: therideshareguy.com/taxguide

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