Rideshare Taxes in 2024: What You Need to Know

As a driver, am I an employee or self-employed?

When you are a rideshare driver or you drive for a deliver company, you work for yourself. You are not an employee of Uber, Lyft, Via, Juno, DoorDash, Grubhub, Postmates, or any other rideshare company. Rather, you are a self-employed independent contractor that simply does work for these companies. That is an important distinction when you are filing your taxes. That’s why you might get a 1099-K in the mail for the money you bring in this way, not a W-2. Even if you only do this parttime, or have a full-time job in addition to driving.

In addition, if you drive frequently for a rideshare or food delivery platform and expect to owe more than $1,000 on your taxes, you also need to consider filing quarterly estimated income taxes and pay the IRS the taxes you owe. When you work for someone else, your taxes get paid through withholding, so when you work for yourself, the IRS isn’t automatically getting money, which is why you might consider filing quarterly.

What expenses do I deduct as an Uber driver?

Probably more than you think! You can deduct not only direct business-related expenses like gas and vehicle insurance, but maintenance and repairs expenses, vehicle registration, oil changes, tires, and more. You can lower the taxes you owe by keeping diligent records and tracking your expenses in order to have rideshare tax deductions.

What are some other tax write off expenses? 

Drivers can deduct expenses on refreshments and other goods if you offer them to your riders – like water, snacks, and phone chargers. You can also write off and deduct items to keep your vehicle clean and safe for riders, including: 

• First aid kits
• Roadside assistance plans
• Jumper cables
• Auto maintenance (including oil changes)

Anything that you buy for your contract work, you should consider as rideshare tax write-offs. Things that don’t count? Items you purchase while working, but don’t have anything to do with keeping your business operating.

How do I keep good records?

You need to track all income from your rideshare driving, and you also need to track all the expenses that you have as a part of your job.

You need to track the following things when you’re working: 

• Your mileage
• Gas
• Maintenance on your vehicle
• Depreciation of your vehicle
• Any information on lease payments
• Vehicle insurance
• Car washes
• Towing
• Tolls and fees
• Phone and internet bills

It is critical to track all these expenses and keep your receipts so you can claim all the deductions you deserve. You need to have detailed records to back up your claims to avoid risk and penalties and interest from the IRS. It can seem like a lot, but Tax Pros are here to help you get and stay organized year-round.

Here are a couple tips to make record keeping quick and simple:

Tip 1: Track your mileage and other expenses as you go. Make it a daily habit. It is incredibly hard to piece together all your expenses and recreate records later. Every receipt you lose or misplace could be costing you money on your taxes. Especially because companies like Uber and Lyft won’t do it for you. They only have records of the passengers you picked up and not other things like the mileage to the DMV and maintenance shop. 

Tip 2: Use apps or software to make it easier. Instead of stuffing receipts in your wallet or purse, you can download one of the many apps that will let you take pictures or scan your receipts, easily categorize them, and save them to the cloud. That way, you have them forever and won’t need to go back and recreate. Also, you can use a mileage app to keep a real-time mileage accounting for you.

Tip 3: Track your income from ridesharing and food delivery. The responsibility to properly report your income and tips is on you, not your rideshare partner. Even if you do not get a 1099-K form or another tax document, but you know you earned money from ridesharing, you must report it on your tax return or risk issues with the IRS. In many cases, you’ll get a 1099-K form, but you need to make sure it’s accurate. It’s your responsibility, and it is mandatory that you keep track for yourself and list all income on your tax return.

What are the two ways I can calculate the mileage deduction 2023?

One option is to claim the standard mileage deduction. This deduction is calculated by multiplying the total business miles you drove by a standard rate. You can count every mile you drove while ridesharing, including the mileage driven to a spot to wait for your next customer and every other business travel mile. The rates for the standard mileage deduction change each year but, luckily, there are lot of helpful calculators available online. While this is the easiest option, the drawback to taking the standard mileage deduction is that you cannot deduct any other costs associated with your car (gas, maintenance, depreciation, etc.), because these expenses are included in the mileage rate.

The second option can take more work on your end, but it can have a bigger benefit. It’s the actual car business expense deduction. This option can be more complex, and you will need to keep detailed records of every expense associated with your vehicle and ridesharing job. But basically, an actual business expense deduction method you take is the business portion of the total car expenses you incurred during the year and deduct the total.

How do rideshare drivers earn income, and how do expenses help as a rideshare driver when filing a tax return?

As a self-employed rideshare driver, you work for yourself, and you are considered a small-business owner by the IRS. That means you have a lot more deductions available to you than if you worked for someone else as a traditional employee.

And, as you earn income, you are also incurring expenses for that income. For example, every mile you drive adds more upkeep to your vehicle, which can be a deductible expense, which reduces the income you pay tax on.

What is rideshare income?

As a rideshare driver, the way you earn income differs by company. And your income is broken down into two parts: gross and net.

• Gross income is the total amount you earn
• Net income is your actual profit, after expenses and deductions are taken out.

Your gross income varies by rideshare company – some by mileage, and others by trips.

Are Uber tips taxable?

Yes. Tips you receive from the rider are also taxable.

All of this money is taxable income and should be reported to the IRS. The best thing to do is talk with your Tax Pro to figure out what’s what, so you don’t overreport to the IRS and pay more than you need to.

When do I owe the IRS taxes?

This year, taxes are due April 15, 2024. If you cannot make the final deadline, you can file an extension until October 15, 2024.

As a self-employed taxpayer, you also may need to pay quarterly estimated payments. You have four due dates to pay in taxes on the money you earned that quarter.

If you don’t pay enough tax by the quarterly deadline, you may be charged a penalty, even if you receive a tax refund.

How can rideshare drivers file their taxes?

There are two ways you can file your taxes: on your own or with the help of a tax professional. At Jackson Hewitt, we have Tax Pros across the country who are experts in federal, state, and local tax laws so you don’t have to go it alone if you feel overwhelmed, and you can make sure you’re getting all the credit (and deductions) you derserve for having self-employment income. Find an office near you and work with a Tax Pro today.

About the Author

Mark Steber is Senior Vice President and Chief Tax Information Officer for Jackson Hewitt. With over 30 years of experience, he oversees tax service delivery, quality assurance and tax law adherence. Mark is Jackson Hewitt’s national spokesperson and liaison to the Internal Revenue Service and other government authorities. He is a Certified Public Accountant (CPA), holds registrations in Alabama and Georgia, and is an expert on consumer income taxes including electronic tax and tax data protection.

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