Driving for Uber or Lyft: Tax-Saving Opportunities
Driving for Uber or Lyft is more than just a way to earn extra cash—it’s a real business with real tax-saving opportunities. Whether you’re hitting the road full-time or part-time, understanding what you can (and can’t) deduct can save you thousands on your taxes.
Disclaimer: This blog is for informational purposes only and does not constitute financial or tax advice. Always consult a qualified tax professional (like TaxZinger!) for advice tailored to your unique situation.
1. Mileage: Your Biggest Tax Deduction
The IRS allows you to deduct miles driven for your rideshare work, and this can add up fast.
Standard Mileage Rate
- 67 cents per mile driven for business use (as of Jan. 1, 2024).
- 21 cents per mile for medical or moving purposes (for qualified active-duty Armed Forces members).
- 14 cents per mile for charitable organizations.
How to Track
- Use mileage tracking apps or your rideshare app’s reports.
- Include miles between pickups and when driving back home after dropping off a rider.
🚗 Pro Tip: Keep a mileage log with the date, purpose, and starting/ending odometer readings to ensure accuracy.
2. Actual Vehicle Expenses: An Alternative to Mileage
Instead of using the standard mileage rate, you can deduct actual vehicle expenses if they’re higher. These include:
- Gas
- Oil changes and maintenance
- Insurance
- Car washes
- Lease payments or loan interest
- Depreciation (if you own your car)
Which Method Should You Choose?
- If you drive a lot, the mileage method often provides a bigger deduction.
- If you own a newer or more expensive vehicle, the actual expense method might save you more.
3. Cell Phone and Internet Costs
- Monthly phone and data plan costs
- A portion of your home internet bill (if used for work-related purposes)
📱 Pro Tip: If you have a separate phone or line exclusively for work, you can deduct 100% of those costs.
4. Snacks and Amenities
Providing extras for passengers? These are deductible:
- Snacks and drinks
- Tissues, air fresheners, and cleaning supplies
- Phone chargers and accessories
5. Tolls and Parking Fees
Deduct tolls and parking fees related to your rideshare work.
⛽ Pro Tip: Keep receipts or use your app’s tracking features to log these expenses.
6. Insurance and Licensing Fees
Deductible costs include:
- Rideshare insurance
- State and local licensing fees
- Background check costs required by Uber or Lyft
💼 Pro Tip: Renewing your driver’s license for rideshare purposes? That’s deductible too.
7. Car Washes and Cleaning
Keep your car clean and deduct expenses such as:
- Regular car washes
- Deep cleaning after a messy passenger
8. Health Insurance Premiums
If rideshare driving is your full-time job and you’re paying for your own health insurance, you may qualify for a deduction.
Who Qualifies? This applies if you’re not eligible for health coverage through another employer (e.g., a spouse’s plan).
9. Miscellaneous Expenses
- AAA or roadside assistance memberships
- Dash cams (if used for security purposes)
- Vehicle registration fees
10. Self-Employment Tax
As a rideshare driver, you’re considered self-employed, meaning you’ll pay a 15.3% self-employment tax (Social Security and Medicare). However, you can deduct half of this tax when calculating your taxable income.
Stay Organized: The Key to Maximizing Deductions
- Use apps to track mileage and expenses in real time.
- Keep a folder (digital or physical) for receipts, toll records, and car expenses.
- Save your Uber/Lyft driver summaries—they’re invaluable during tax season.
Final Thoughts: Drive Smart, Save Big
Driving for Uber or Lyft isn’t just about getting passengers from point A to point B—it’s about running your own business. By claiming these deductions, you can reduce your tax bill and keep more of what you earn.
At TaxZinger, we specialize in helping gig workers like you navigate taxes. Ready to maximize your deductions? Schedule a consultation today and take control of your taxes!
