Are you an Uber or Lyft Driver? If you are, you should know about these tax deductions!
The popularity of share riding services increases every day as well as the need for drivers. Uber and Lyft drivers are considered self-employed and at the end of the year receive 1099 from its employer. As Uber/Lift driver you have 2 methods for deducting driving expenses - standard mileage or actual expenses. Consult with your tax prepare before filing the taxes which one of these options will be the most favorable for you.
Check this list of deductions that each driver can use to reduce the taxable income.
1. Standard Mileage Method. Your total business mileage is deductible. Don’t forget to keep a written record of the mileage driven. In 2017 IRS’s published business mileage rate was $0.535. This rate is changing year to year.
2. Actual Expenses Method. According to the IRS, in order to use this method, a driver must determine what is the actual cost to operate a car that is related to the business. In addition to that, a driver must keep a record of all expenses.
Here is the list of possible expenses under the actual expenses method:
Car Payment. If you are leasing your car or still have loan payments on a car you can deduct some portion of it.
Depreciation (Owned). If you own vehicle, you can deduct depreciation for over 5 years period.
Interest on Auto Loan (Owned). You may deduct a part of the loan interest if you own a car.
License, Title, and Registration. You can deduct this fees if you meet some specific requirements.
Gasoline. You can deduct the cost of the fuel as long as it related to the business. To do so you have to have proof of expenses such as checks from the gas stations.
Maintenance. You can deduct part of the car maintenance such as oil change, tire rotations, inspections and replacement of brake pads, and car washes.
Insurance. Now insurance companies require you to report if you use your vehicle as an Uber or Lyft driver. Your insurance price depends on it. The IRS allows deducting a part of your insurance premium.
Food and Beverages for Passengers. This expense is going into the category of entertainment.
Mobile Phone and Charges. To operate Uber or/and Lift application, a driver must have a telephone and internet access. IRS allows deducting only the portion of the phone bill that related to the work.
Parking Fees & Tolls. Any necessary and related to the Uber or/and Lift driving parking and tolls are deductible.