It’s that time of year again. As all of you know by now, filing taxes as an independent contractor is a little different than as a W-2 employee. You should receive a 1099 or an annual summary from all of your gigs and those are what you will need to verify your income for the IRS. But from there, what do you do?
The form used to claim the income and deductions from 1099 income is called a Schedule C. You’ll have to do a separate one for each gig. This lays out your income and the most common expenses when running a business. There is also a miscellaneous line for other things. So, what are the biggest things you should be deducting?
- Platform fees. That’s often overlooked. The income you must claim is the ENTIRE amount the passenger paid. This will be the number on your 1099/annual summary. You take the platform fees as a deduction, so you don’t pay tax on money you didn’t actually receive.
- Mileage. This is the most important one you have to self-monitor. Use a mileage tracker, pen and paper, whatever. You just need proof that you have been tracking. Both Uber and Lyft platforms will give you a mileage summary, but they often don’t catch everything. Trust yourself only. This deduction covers gas, maintenance expenses, and vehicle depreciation. This year it’s $.58/mi.
- Phone bills. Part of your phone is used for business. Both the cost of the phone and the phone plan are eligible expenses, but only the extent used for your rideshare business is deductible. For example, if you spend 20 hours per week driving for rideshare, you can claim a portion based on that number. Make sure to keep track of that throughout the year.
- Car Washes. Now this one is a little debatable. Are car washes maintenance? Some say yes, some say no. The IRS has not set a specific rule about it. I choose to include them because they are not an expense that’s required for the car to run. It’s extra.
- Candy/Water/Phone Accessories. These are also common expenses that won’t be flagged by the IRS as unusual so long as it’s a reasonable amount. Probably less than $1,000 a year. So, don’t forget to keep your receipts for chargers, mounts, dash cams, etc. They all add up.
All of these deductions should bring your income down to very low, if not negative. Just remember, you can not double dip. If you claim your phone bill on your Uber Schedule C, you can’t use it again on your Lyft. You can split it 50/50 if you want.
These are just the basics, so I recommend seeing a professional, at least for your first filing as a gig economist. It’s a lot of work. And remember, I am not a CPA – I am just a long-time driver with some experience in this matter. GR Rideshare Adventures is not licensed to provide tax advice, these are just some tips to get you started. We recommend our readers to seek out professional advice when it comes time to file.