Around this time every year, Uber and Lyft drivers are also expected to be a tax accountant, as an independent contractor you’re responsible for your own taxes. Every year in early February, 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. As an independent contractor, you’ll have to file a Schedule C in addition to your 1040.
Although this may cause an extra burden the status of independent contractor allows you to take advantage of a number of tax deductions, which means more money in your pocket. Our mission at Imperial Acquisitions LLC is to simplify the pains that come with being an independent contractor. Below is a list of the most common ride share expenses, and when they should be considered tax deductible.
The cost of parking fees incurred while working are deductible. These include garages and meters.
If AAA membership or other similar roadside assistance plan because of your driving business and don’t use it during a personal trip, then you can deduct the entire amount.
A driver needs to provide car washes to keep his or her customers happy. Because car washes are considered part of your business’s “ordinary and necessary” operating expenses, you can deduct a portion of those expenses on your tax returns.
If all of your phone calls are business related, you can deduct the total amount of your cell phone bills, including any activation fees. However, if you’re like most people, and you use your phone for both business and personal use, then you will have to determine the deductible business usage percentage.
Since you are probably using your vehicle for a combination of business and personal use, you will be able to deduct a proportion of your maintenance costs at tax time. This includes oil changes, tire rotations, inspecting and replacing brake pads, and anything else required to keep your car running smoothly
You can deduct your gas costs as long as its business related. This means that you can deduct gas costs that you incur while picking up customers and driving them to their destinations.
Car insurance is just another critical cost of running your ride share business – you can’t drive without it! Like other actual expense deductions, remember that you can only deduction the amount proportionate to your business usage.
When filing taxes, you have a choice between two deduction methods: Standard Mileage or Actual Expenses, not both. The Standard Mileage deduction method is the easiest, but may not give you the largest deduction. The Actual Auto deduction method allows you to depreciate your vehicle and deduct most of your vehicle-related expenses by the percentage of business use but requires more detailed expense tracking.
Even if you lease, and don’t own your car, you can deduct a portion of the lease payment proportional to the business use of your vehicle.
Food and Drinks for Passengers
The IRS says that you can deduct business-related entertainment expenses you have for entertaining a client, customer, or employee. That includes the food and drinks you purchase for your passengers. However, you can generally only deduct 50% of business-related food and drinks, so don’t go crazy spending because you will only be reimbursed for half of it.