With the tremendous growth of Uber, Lyft and other ridesharing organizations over the last few years, there has been a significant upswing in the number of self-employed individuals. While bringing in self-employed income can boost the bankroll in the short-term, when tax time comes, many drivers may be in for an unpleasant surprise.
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Taxes for the independent or contract worker are more stringent than regular employees who receive a W-2. Luckily, it is possible for rideshare drivers to take advantage of certain deductions that may make tax time a little less stressful—and expensive!
- Mileage – While your Uber or Lyft statement will show mileage driven for profit, there are other miles you may be able to claim too. Think about any distance you drive because of your rideshare business that you wouldn’t otherwise drive—those are deductible.
- Car Payment – If you lease, and you’re using your car for your business, you will be able to deduct a portion of your payment proportionate to the amount of time you use it for business compared to for private use.
- Loan Interest – On the other hand, if you have a loan on your vehicle, you can deduct loan interest. Once again, this is in proportion to the amount of time you use it for business.
- Depreciation – If you own rather than lease, you will be able to depreciate your vehicle. There are multiple ways to do this. The key is that you choose one particular way of doing it and stick with it.
- Maintenance and Repairs – Maintaining your car is important to keep it working well so that you and your customers are safe. Make sure that you keep track of how much you spend on regular maintenance and repairs so that you can deduct these expenses. Don’t forget, car washes are a must too.
- Car Insurance – While you may have insurance anyway since it is required to operate a rideshare business,Uber you can deduct this as a business expense and save on your taxes.
- Mobile Phone and Wireless Plan – These rideshare companies require that you have a working smartphone and wireless plan with data. Since this is a requirement to work, you will be able to deduct this amount, including activation fees (if any.)
- Extras for Your Passengers – Do you provide water, tissues, hand sanitizers or snacks for your passengers? If so, these extras are all tax deductions.
- Parking Fees and Tolls – When you pay to park or go on a toll road during your business drives, you can save your receipts and use these as a deduction at the end of the year.
- Credits for an Environmentally Friendly Vehicle – If you have a hybrid or environmentally-friendly vehicle, you may qualify for additional credits since you are doing your part to help keep the earth safe.
While these deductions are usually a good option for rideshare drivers, it is important to remember that not every deduction will work for every individual. It is always best to talk to a tax expert to see if these deductions could apply to you.
If you have any questions, feel free to contact us today!
ABOUT THE AUTHOR
Brittany E. Wood
Brittany is a Staff Accountant with Brown Schultz Sheridan & Fritz. She specializes in providing tax services for clients.