Tax Deduction Tips for Uber Drivers & Rideshare Drivers
If you are an Uber driver, or a driver for any other rideshare company such as Lyft, you are considered an independent contractor, not an employee. As an independent contractor, you are self-employed and therefore, you'll need to file your taxes accordingly.
If you are new to the world of self-employment and being Uber driver, you can enjoy many benefits which include making your own hours, and not having to report to company higher-ups and office politics. Along with the independence being Uber driver brings, comes the responsibility of filing your taxes in accordance with the IRS. This means keeping solid records of all your expenses and taking advantage of money-saving tax deductions which rideshare drivers are entitled to.
Below are 7 tips that every Uber driver should know to help prepare for tax time.
Tip No. 1 – Keep Accurate Records
To claim a tax deduction, you must keep accurate records so that you are legally able to claim that deduction. Such deductions include car mileage for business purposes and Uber driver operating expenses, such as your mobile phone and car washes. The best and easiest way to do this is to use an app that automatically tracks mileage and captures all your expense receipts and reporting.
Everlance is the #1 top-rated Uber mileage tracker app. It allows rideshare drivers to easily distinguish between personal and work driving by merely swiping right or left, so all your Uber trips are recorded appropriately. The Uber expense log allows drivers to take photos of receipts, manually add expenses, and/or link your bank account or credit cards. This way, you have a record of all your mileage and expenses, along with the ability to download IRS-compliant reports when it’s time to file taxes.
Tip No. 2 – Deduct Standard Mileage or Actual Expenses, Not Both
It's essential for Uber and other rideshare drivers to understand that there are two different ways to deduct your vehicle expenses, and you can only choose one. The two choices are Standard Mileage or Actual Expenses. You cannot file for both, because then you’d be double-deducting and that’s a big no-no.
Tip No. 3 -- Understand the Standard Mileage Deduction
Standard Mileage refers to the national rate you are allowed to claim per each mile driven for business purposes. In 2018, that rate is 54.5 cents per mile. If you choose to claim this amount instead of Actual Expenses, it’s intended to cover all of your Uber driving expenses, which include gas, maintenance, and depreciation.
The good news is that mileage is very easy to keep track of, especially when using a self-employed mileage tracker. Make sure you’re not under-tracking your mileage by taking advantage of when you can start recording your miles. Uber, Lyft and other rideshare drivers may start tracking their mileage as soon as you accept a ride, and continue tracking mileage until your rider is dropped off at their destination. You can also deduct the mileage from the start of your shift when you leave your home to pick up your first rider, and heading back home after your last rider. The miles driven between two riders is deductible, as well. The only time mileage is not deductible is when you are taking a break for personal time, such as grabbing a bite to eat or running an errand.
Learn about the IRS commuting rule and what you can and cannot deduct.
Tip No. 4 – Know What Qualifies as an Actual Expense
If you decide to report Actual Expenses instead of Standard Mileage, you’ll need to know what may be deducted under this category so you can keep precise records of these expenses as they are incurred. These include:
- Gas. Every time an Uber driver fills their car with gas, record that amount or actual receipt in your expense log. However, only include gas expenses that are used specifically for business purposes, not personal use.
- Maintenance. Car repairs, tire rotations, and oil changes all fall under vehicle maintenance, which is needed to be a rideshare driver, assuming you are using your own car. Therefore, this is a deductible expense, as long as you keep records and receipts of these services.
- Insurance. Both Uber and Lyft require their drivers to use their insurance coverage, but you also need to have your own car insurance to own and operate a vehicle. Hold on to your monthly statements so you can use your insurance payments as a deduction.
- Depreciation. If you own the vehicle you are using as an Uber driver, you can deduct your car's depreciation or reduction in value over time.
- License and Registration. As an Uber driver, it is required that you have a valid driver’s license and your vehicle must be registered. If you need to renew your driver's license or renew your vehicle registration while serving an Uber driver, then keep records of these transactions so these expenses can also be deducted.
Tip No. 5 – Deduct Common Operating Expenses in Addition to Whether You Take the Standard Mileage or Actual Expenses Deduction
Regardless if you choose to take the Standard Mileage or Actual Expenses deduction route, you may also deduct Common Operating Expenses in addition to the above. As long as these expenses are considered to be “ordinary and necessary” according to the IRS’ definition of such. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate to your trade or business.
These deductible expenses include many things. First is your mobile phone, including the cost of the phone itself, your mobile plan and accessories, but only if your phone is used strictly for business. If it is used as your personal phone too, then only a portion of these expenses are deductible. Remember to keep records of all these expenses.
Common deductible expenses for Uber drivers:
- Car seat covers and floor mats
- Supplies for riders such as gum
- Emergency car cleaning
- Parking fees
Tip No. 6 – Make Sense of Your 1099 Forms
Employees receive W-2 forms, but as Uber drivers are considered independent contractors, you’ll receive one of two 1099 forms from your rideshare operator. The 1099 form you receive will be dependent on how much money you made from your Uber driving gig, and how many rides you performed during the previous calendar year.
If you earned less than $600 in the previous year, Uber is not required to send you a 1099. However, you still need to report your Uber income, even if it was less than that amount on your tax return. If you made between $600 and $19,999 and had less than 200 transactions (meaning rides), then Uber will send you a 1099-MISC form. If you had more than 200 transactions and earned more than $20,000, then you will receive a 1099-K form.
You should receive your 1099 form from Uber by January 31, 2019, or by the first or second week of February at the latest. Then use a tax professional or tax software to walk you through the numbers they need. It’s less complicated than it might sound because 1099s are actually designed to make the filing process easy.
Tip No. 7 – Simplify Your Accounting
Keeping detailed accounts of your mileage and expenses is the best way to be prepared when tax time rolls around. Not only are there many expenses to keep track of as an Uber driver, but you also want to make sure you are getting the most out of your allowable deductions.
This is where Everlance Mileage Tracker & Expense Log for Self-Employed can help. The app is currently used by more than 300,00 Uber drivers who record more than $6,500 in deductions each year. Everlance will automatically track your rideshare business mileage, expenses, and income including tips. This way, at the end of the year you’ll have a detailed snapshot of all your deductions that you can hand over to your tax preparer, or upload into your tax software. Everlance is simple, time-saving and makes accounting and tax preparation less burdensome.
The Everlance blog does not constitute tax advice. For tax advice, please contact a tax professional.