When you’re an Uber driver, there’s a little more to it than just being available to give people rides. Yes, it’s a simple concept, and it’s a good way to make extra money, but you also have to think about certain financial elements.
For example, do you know how much Uber charges drivers in fees? What about when it’s tax time? How should you handle that?
As an Uber driver, there are important tax considerations to keep in mind to keep your liabilities low when it’s time to pay the IRS.
The following are some of the key things to know about taxes and deductions if you’re an Uber driver, or you’re a rideshare driver for another service.
Pay Quarterly Taxes.
Not only does the IRS require it, but it makes it easier when you’re a self-employed independent contractor to pay your taxes quarterly. Then, when the time comes you’ll pay your yearly income tax return. But if you’ve kept up with things on a quarterly basis, you might owe nothing, or even be entitled to a refund.
Along with the estimated quarterly taxes you pay, Uber will file the 1099-MISC or the 1099-K with the IRS, and if applicable, your state as well if you make more than $600 driving for them in the year.
Driving for Uber does qualify you as being self-employed, and it’s important to understand what this means because if you’re used to having your taxes withheld by your full-time employer, it can be a bit shocking to owe taxes.
The biggest deductions most rideshare drivers can take on their taxes relate to their car expenses. You can use a standard mileage rate which gives you a mileage deduction of 53.5 cents, per mile you drive for business purposes, or you can deduct actual expenses.
Actual expenses can include things like lease expenses if you lease your car, depreciation, gas, and repairs.
For a lot of Uber and rideshare drivers, it’s easier to stick with the standard mileage rate, because otherwise, you’re going to have to keep up with a lot of information.
You can track your miles using an old-fashioned notebook, or you could go with a mileage tracking app instead.
Other Business Expenses.
No one wants to pay more in taxes than they have to, so it’s important to be aware of some of the deductions that might be available to you as a rideshare driver.
A big one is the cost of your cell phone, and it’s 100% deductible if you only use it for work.
Also, any extra insurance coverage you get for your business can be deducted, as can the cost of things you might purchase to provide to passengers. If you pay parking and tolls while you’re working, you can deduct those. And if you’re using your car for business and you’re paying interest on a car loan, a portion of that may be deductible as well.
Finally, the Uber fees and commissions you’re charged are deductible as well, as long as the company takes them directly from your compensation.