The information in this article is up to date for tax year 2024 (returns filed in 2025).
The rideshare industry has seen explosive growth, with over 1 million Uber drivers in the U.S. alone. As a rideshare driver, your tax obligations differ from traditional 9-to-5 employees, whether you’re driving for extra income or as a full-time job. To ensure you maximize your deductions and minimize tax liabilities, it’s essential to follow key tax tips for rideshare drivers. Use these strategies to get the most out of tax season and keep more of your hard-earned money.
Do Rideshare Drivers Pay Taxes?
As a rideshare driver, you are required to file your tax return if you earn more than $400 driving for Uber or Lyft. Tax returns are typically due April 15th of each year. If you are unable to file on time, you can request an extension by filing Form 4868, which will give you an additional six months to file your return. It’s also important to keep accurate records of your income, deductions, and credits to ensure you are taking advantage of all the tax savings available to you. Maximize your refund with ezTaxReturn – get started now!
Tips for Preparing to File Taxes
Keep Detailed Records
In order to take advantage of business-related tax deductions, you’ll need to keep careful records of your business expenses and how you use your car. For instance, you can deduct the costs of using your vehicle for work but you can’t include costs incurred during personal use. This means any miles you drive for Uber or Lyft count but that trip to the grocery store does not.
Keeping detailed records of your expenses and income over the past year can help you during tax season.
Pro Tip: Mileage apps can help you track your business-related trips so you know exactly how many miles you can count towards the Mileage Deduction.
Open a Business Bank Account
Mixing personal and business banking can make accounting a headache—especially come tax season. To simplify your finances, consider opening a separate business bank account to manage all your business expenses. This will make it easy to track business expenditures (such as gas or even snacks and refreshments), and provide a clear record of bank and credit statements when you go to file. Other drivers have found it beneficial to separate their personal and business finances.
Be Prepared to File Quarterly Taxes
If you are driving regularly for Uber or Lyft, you may be required to pay quarterly estimated taxes. As taxpayers who are self-employed, you don’t have an employer withholding taxes for you in your paychecks. This means you’ll need to pay those taxes yourself through quarterly payments. Be prepared to set aside about 30% of your earnings to cover these costs over the year.
Your quarterly taxes are calculated based on your previous year’s earnings and paid out in four equal installments in April, June, September and January of the following year.
Tax Deductions for Rideshare Drivers
Rideshare drivers are self-employed, which means if you contract through Uber, Lyft or another rideshare service, you can deduct your driving expenses on your taxes. So what exactly qualifies as a tax deductible business expense?
If you’re a rideshare driver, here are a few expenses you can write off:
Operating Expense Deduction
These are business expenses separate from your vehicle costs. These can include
- Mileage tracking software
- Uber and Lyft fees and commissions
- Snacks for passengers
- Chargers, mounts, or other accessories
- PPE like masks or hand sanitizer
- Cell phone, including carrier charges*
- Certain medical expenses related to your business
Note: You can only deduct the portion of cell phone expenses related to business use. So if you use your phone for personal and business activities, you’ll have to calculate the portion of the costs that are business-related. To simplify things, you may want to purchase a separate phone just for your ridesharing activities. That way, you can deduct the full costs associated with that phone.
To claim this deduction, record your operating expenses on Schedule C under Common Operating Expenses. Ready to file? Let ezTaxReturn help you today!
Mileage Deduction (Vehicle expenses)
The mileage deduction allows you to write off expenses related to using your vehicle for work.
You can claim the deduction by choosing the Standard Mileage Deduction or itemizing your costs under the Actual Car and Truck Expenses deduction. Most people will get a bigger deduction under the Standard Mileage deduction. This is also the easier route as itemizing your costs requires keeping detailed records that may require the assistance of an accountant.
To claim the Standard Mileage Deduction, multiply your business miles driven by $0.67 (for tax year 2024). This rate includes costs for gas, maintenance, repair, and depreciation. Choosing the right deduction method can help you keep more money in your pocket.
Self-Employment Tax Deduction
As an independent contractor, you are responsible for paying self-employment taxes. Self-employment taxes are the employer and employee portions of the Social Security and Medicare taxes. In a W2 job, your employer would normally cover half of those taxes. As a self-employed person, you are on the hook for 100% of the tax.
The good news is that as an independent contractor, you can apply the self-employment deduction to deduct the employer-equivalent portion of the self-employment tax. This only affects your income tax. Married couples filing jointly can also benefit from the self-employment tax deduction.
Gig work like rideshare driving can be a great way to earn extra income on the side. Keep more of that money in your pocket come tax time when you file with ezTaxReturn. They walk you through the filing process step by step to ensure you take advantage of every deduction available to you. Get the biggest refund, guaranteed. File today.
The articles and content published on this blog are provided for informational purposes only. The information presented is not intended to be, and should not be taken as, legal, financial, or professional advice. Readers are advised to seek appropriate professional guidance and conduct their own due diligence before making any decisions based on the information provided.
