How to calculate and reduce taxes for Uber and Lyft drivers
As a driver of a company such as Uber, Lyft, or another car-sharing service, the most important thing you should understand about your taxes is that you are probably not an employee de Uber o Lyft. of Uber or Lyft. The drivers of these companies are usually independent contractors, this is important because it has tax implications at the time of filing your tax return.
Being an independent contractor means that you are a self-employed worker. Therefore, you are the owner of a separate business, which the company uses to provide driving / transportation services. Then, when you receive a payment, it is important to understand that this is NOT a traditional “paycheck” and that taxes have probably not been deducted from it.
Having understood this, it is clear that it will be up to you exclusively to identify and set aside possible federal and state income taxes, as well as taxes from Medicare and Social Security. These combined taxes can reach between 30% to 50% of your income, depending on your place of residence and the amount of money you have to declare, so be sure to reserve enough money to pay them.
“What aboout tax deductions for my car?”
According to the previously discussed, you are the owner of your own business, and therefore you can make tax deductions for expenses incurred while performing your work, there are two ways to make deductions for the commercial use of your car:
- You can deduct the actual operating expenses of the vehicle for business, including those for gasoline, repairs, insurance, maintenance and depreciation.
- Take the standard miles deduction from the IRS. As of 2018, the rate is 54.5 cents per mile driven for commercial use. You can read more about the deduction of standard miles on the IRS Website
If you use your car for both carpooling and personal transportation, you can deduct only part of your expenses that apply for commercial use. And whatever type of deduction you claim, it is essential that you keep detailed records of all expenses, income, mileage records, etc.
The commissions that you pay to Uber or Lyft can also be considered a commercial expense, as well as any cost you must pay for the technology installed in your car. Other tax deductions include:
- Water, chewing gum or snacks for passengers.
- Tolls and parking fees.
- The companies of shared trips require the use of a smartphone, from which you can deduct only a part attributable to the use of the mobile during your working day, to simplify, it may make sense to have a dedicated mobile phone for work only.
With TurboTax information, read the full article here: