Uber and Taxes / Tracking your mileage

As Uber/Lyft drivers, we are independent contractors, and as such each year we need to file taxes for our business as Uber/Lyft do not withhold any taxes on our behalf.

At tax-filing season each spring, you’ll be reporting your self-employment income and expenses on Schedule C, as well as filling out Schedule SE for self-employment tax if your net income from the work is greater than $400.

You can do this online with TurboTax for about $100, or TaxAct for about $35, or you could just go to a CPA and pay a couple hundred bucks (though with TurboTax and TaxAct, it’s as simple as just answering a bunch of questions).

So how much taxes will you pay?

Here’s the thing – most drivers pay nothing. Why? Mileage.

Uber pays you 65c for every mile you drive, but they keep 20% so you’re looking at 52c a mile. The IRS says if you’re using your car for business, you can write off 54c for every mile, so technically you’re making a loss on every mile (although you’re almost certainly not, because unless you’re driving a brand now $35k car, it’s not costing you 54c a mile to run – most cars are closer to 10c a mile).

Better yet, while Uber only pays you for miles when you have a passenger in the vehicle, the IRS allows you to deduct ALL MILES other than commuting – so if you drive four miles to pick up a passenger and one mile with the passenger in the car, the IRS will allow you to deduct all six miles, whereas Uber’s only paying you for one.

Result? The vast majority of drivers record a loss as a driver (for tax purposes) and pay not a penny in taxes.

So how do I know how many miles I drove?

You have two options here, either you keep a mileage log book where you manually write down every mile you drive as a rideshare driver, or else you use an app on your phone to track your miles.

Most drivers use MileIQ which costs $6 a month (or $4 a month with this link) and runs in the background, tracking all your miles. You can turn it on and off as you like (for when you’re using the car for your own personal stuff), or go back later and tag which trips were rideshare.

At the end of the year, Uber will send you a statement showing all your earnings and the number of miles you drove with a passenger in the car. Lyft also sends you a statement, but their mileage is all miles while logged into the app.

Simply file your taxes with the earnings from your statements and the mileage from MileIQ, and you’re golden!

And of course, if you have any questions, come ask the group!

A note from one of our members on quarterly filing.

NOTE: I’m not a tax professional, but am a business major with a decent consumer knowledge of finance. As always, consult a professional for their advice before making a major financial or tax decision.

So, looks like we’re not required to submit quarterly tax estimates unless our projected amount owed is going to be over $1000 for the year. You can estimate this by multiplying your *profit* (after mileage deductions) by 15%+your tax rate. So, if you’re tax rate is 25%, multiply it by 40%. If that number is over $1000, or might be by the end of the year, then you’re gonna have to pay quarterlies.

If you have a normal day job and are subject to withholding there, the $1000 would be AFTER your refund is used up. For example, if you’re expecting a $400 tax refund from your day job, then you can estimate to owe up to $1400 in income tax on Uber income before filing quarterlies. An easy way around this if you’re close on Uber income is to have your day job increase withholding.

Alternatively, if you make most of your money self-employed, the $1000 threshold for quarterlies applies for everything lumped together. IE, if you are expecting a tax bill of $800 from Uber income and $400 from Lyft, you’re over by $200.

Technically, you owe income taxes on your tips, too. While the IRS really has no way to track your cash tips, they are subject to tax.

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