The proliferation of ride-sharing companies like Uber and Lyft has created a new source of income for many people.
In general, as a driver for a rideshare company, if you hire your driving services and your work is not under the control of an employer, that means you are considered an independent contractor or self-employed person.
As a rideshare driver, you may have received a tax summary that includes your earnings and expenses, and some forms from the IRS to report your earnings on 2022:
- TO 1099-K if you earned more than $20,000 in customer payments and 200 transactions. The IRS announced a delay in the reporting thresholds for third-party settlement organizations set to take effect for the next tax filing season. As a result of this delay, TPSOs will not be required to report tax year 2022 transactions on a Form 1099-K to the IRS or payee in the $600 lower limit amount enacted as part of the 2021 American Bailout Plan. Some well Known Third Party Settlement Organizations (TPSOs) include Venmo, PayPal, and CashApp.
According to the IRS, this means that for tax year 2022 the existing 1099-K reporting limit of $20,000 on payments of more than 200 transactions will remain in effect.
Even if you don’t earn enough to receive a 1099-K from a third-party provider or a 1099-national executive committee For income earned as a self-employed person or contractor, you must still report your income on your taxes.
However, because the forms won’t capture the many tax deductions you can take as a driver (which can significantly reduce your taxes), here are some of the common business expenses you can claim:
One of your biggest tax deductions will be for business mileage at 58.5 cents per mile for the first 6 months of 2022 and 62.5 for the last 6 months of 2022 (effective July 1, 2022). When you file your taxes and report any mileage deductions, remember to include:
- Miles when driving a passenger
- Miles when driving to pick up a passenger
- Miles when driving home after dropping off a passenger
Some rideshare companies will log your miles on and off the ride. This can help you calculate your total mileage tax deduction. If you can, you might as well keep track of this yourself, as the rideshare app may not keep track of all your tax-deductible mileage. You can easily and automatically track your business mileage deduction year-round when you use the Application for Quickbooks freelancers.
If you claim the standard mileage deduction, you cannot claim the actual expenses of the car. If you claim actual car expenses instead of standard mileage, you can claim expenses associated with maintaining your car based on a percentage of your business use. This includes expenses like oil changes, gas, auto insurance, maintenance and repairs, lease payments, and depreciation.
All rideshare companies communicate with you through their mobile app. Since your phone is a business expense, you may be able to deduct the expenses associated with your phone.
This includes the cost of the phone if you bought a new one this year. It also includes a percentage of what you pay for cell phone service based on how much you use your phone for business versus your regular personal use. If you use it half the time, you can claim 50% of the cost to the business. If you purchased any accessories, such as a replacement car mount or charging cables, those accessories are also tax deductible.
Passenger supplies, treats and treats
Have you stocked your car with drinks, snacks, or other goodies that you give to your passengers? If so, those snacks and drinks are tax-deductible expenses (as long as you offer them exclusively to your passengers).
If you purchased additional protective supplies like masks and hand sanitizer for your passengers, those are tax-deductible expenses, too!
Rates and tolls
If you have to pay fees or tolls associated with your driving that are not reimbursed through the rideshare company, those expenses are also tax deductible.
For example, if you have to pay a toll and the cyclist does not reimburse you, you can claim it as an expense. If the rideshare company reimburses you because their app detects that you went through a toll, then you can’t claim it.
Personal Grooming, Uniforms
Unfortunately, grooming expenses, like a haircut and clothing, are not tax deductible. Grooming is never tax deductible and rideshare companies don’t require a uniform, so you can’t claim work clothes as an expense. This also means that dry cleaning your clothes is also out of the question.
Driving for a rideshare company can be a great way to earn extra income. And learning about all business deductions can be a great way to keep more at tax time!
Don’t worry about knowing these tax laws. Self Employed TurboTax it will ask you simple questions about you and your business and give you the business and personal tax deductions you are eligible for based on your inputs. you can also use QuickBooks on your own to track your income, expenses, and mileage throughout the year and then easily export the information to your TurboTax Self-Employed tax return.
Meet with a TurboTax expert who can prepare, sign and file your taxes, so you can be 100% sure your taxes are done correctly. Begin Full Service TurboTax Live today, in English or Spanish, and finish your taxes and forget about it.
Podcast: Can I figure that out? Tax tricks for influencers
Leave a Reply