Gasoline, sure. Mileage, maybe. Chocolate, possibly?
You might question if you are able to deduct these types of thing should you be a rideshare driver for any company such as Uber or Lyft. Excellent news: you’re self-employed plus may qualify to take a number of costs related to your projects. But which ones? And what forms should you use?
Deductions can reduce your tax burden, so it’s important to know which forms you need, how to fill them out and how to maximize your savings. Here are some tips that could help.
Self-employed or employee?
If you participate in the sharing economy by providing car rides booked through an online platform, the IRS generally considers you an independent contractor. You can be considered an independent contractor whether your ridesharing job is your full-time gig or something you do on the side.
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Still need to file?
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As a a sole proprietor individual, you’ll be in charge of paying your own fees, as opposed to depending on an company to withhold them through your paycheck.
The great news is that a few, or all, of the particular expenses related to your own rideshare driving may become deductible.
Forms to find out
The particular company you drive with regard to may issue you the 1099-MISC. This IRS type displays how much the particular company paid you throughout the tax year.
The particular IRS requires companies in order to issue 1099s to independent contractors to whom they’ve paid $600 or more in year. If the company paid you less than $600, they might not send you a 1099, so it’s important to keep your own records of your rideshare income.
When you’re ready to file your Form 1040, you’ll need to complete and attach Schedule C. That’s the form on which you can report your profits or losses as a self-employed worker. It’s also where you’ll list the majority of your expenses and deductions.
You’ll also need to file Schedule SE, where you’ll calculate and report your self-employment tax.
When you’re someone’s employee, your employer typically withholds your share of your Social Security and Medicare taxes from your paycheck, along with your federal income tax. When you’re self-employed, you’re accountable for paying those taxes yourself.
Deductions you might be able to take
Since you use your car for your business, you can deduct car expenses. There are two ways to do that. You can either deduct the specific expenses of operating your car, or take the standard mileage rate deduction.
For 2018, the standard mileage rate is 54. 5 cents per mile.
Despite its name, the standard mileage rate doesn’t just cover distance. In addition, it takes into bank account fixed and variable charges of operating a vehicle, in addition to it’s based on a great twelve-monthly study of individuals costs.
For 2018, typically the standard mileage rate is usually 54. 5 cents each mile.
If you realise it better to track the quantity of miles an individual drove for work, rather then tracking your expenses, typically the standard mileage rate could possibly be a good option regarding you.
Remember, though, when you elect to take typically the standard mileage rate, you will have to get started on using that the initial year you make using it inside your work as a new rideshare driver.
You could switch to actual expenditures later, but if an individual start out using the exact expense method, you can not swap to standard mileage inside subsequent years.
When an individual make standard mileage level deduction, you can’t take almost all of your actual expenditures, like depreciation, lease repayments, gas, oil, repairs, insurance policy, licensing, and so forth, as properly.
If you want to be able to deduct those items, you will need to use the specific expense method.
Actual expenses you might be able to deduct using this method include the following:
You’ll need to keep good records if you opt for the specific expense method. If you qualify to use either method, it may pay to calculate your deductions using both methods to see which will give you the larger deduction.
Because you’re self-employed, you can also deduct business expenses on your Schedule C, including parking, tolls and even mobile phone bills.
However, you can only deduct the portion of these expenses that are actually business-related.
In the chart below, you’ll find some common deductions for rideshare drivers. All deductions can be made in addition to standard mileage and actual expense deductions unless explicitly stated.