How Much Does It Really Cost To Be A Rideshare Driver?

As drivers we all love to talk about the income side of things. We love to talk about how much money we’re making, how much surge we got, or how long that fare was. But like any good business owner will tell you, it’s also just as important to understand your expenses. If you’re one of the top earning drivers and you have the lowest expenses, you’ll actually be making a lot more than a driver who’s on the high side of expenses. Understanding your costs is super important!

Watch my video about understanding your costs, then read the video transcript below.

Knowing rideshare driver tax deductions is crucial

Now, I’m not a tax professional but I do know a thing or two about doing my taxes as a ride share driver. One of the most important aspects of doing your taxes is keeping track and all your spending throughout the year because it leads to your largest deductions. Generally, whatever you guys are spending the most money on, that means you’re going to be able to take the biggest deduction come tax time. You’ll be able to save a ton of money.

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We all know about the standard mileage deduction but there’s actually a lot of other expenses that you can deduct on your taxes too. Maybe it’s better for you to take the ‘actual expense’ method but if you’re going to take that instead of standard mileage, you need to track it all and make sure that you want to compare the two at the end of the year.

The lesser-known deductions

I’m going to talk about some ways that you can save some serious money on your tax return by claiming lesser known deductions. We’ll also show it using QuickBooks Self Employed to make sure that you guys can track it and to make sure that you’re getting the most out of your tax return.

Here we are in the QuickBooks Self Employed home page. We’ll mostly be using the desktop version today but this app also runs on your iPhone or Android so you can access and update all of this info on the go too. One of the best features of this app is that it syncs with your bank account but you can also import expenses and income data from a CSV or a spreadsheet file. Here, we’ve imported financial data for our fictional driver, Casper. As you can see, the app shows us Casper’s total profit and loss and provides an overview of his largest expenses sorted by category. At the top of the dashboard you can see the most recent transactions that need to be filed, so you can click on these tiles and sort between them. As you do that you’ll notice that it updates with the rest of the dashboard.

Quickbooks Self Employed makes rideshare deductions a lot easier

One of the best things about QBSE is how easy it is to keep track of your expenses. By syncing QBSE with your bank account, you can categorize expenses with a press of a button through the web portal or through the app itself. Plus, you can even import cash transactions or spreadsheets with even more expense and income data. By tracking your expenses as business or personal, you’ll be able to make the most out of your tax deductions. QuickBooks Self Employed also helps you simplify the categorization process by adding rules to automate your expense tracking and simplifying the categorization process means you won’t miss a single deduction.

For every driver, miles are often the single biggest tax deduction. Here we can see mileage records from Casper, a typical Uber driver. Casper gets about 45 miles to the gallon in his 2014 Prius and he drives around 900 miles per week. By having these mileage logs, Casper will have all the info he needs come tax time and with QuickBooks tracking your miles is super easy. The app actually does it for you. That feature is IOS only right now but Intuit plans to launch an Android version soon.

Once you have this data, we can start to dive into the numbers. As you can see here, Casper’s auto loan is actually his biggest expense, so it’s important, obviously, to make sure you’re getting a good deal on your loan. Let’s say Casper instead, for example, leased his car for $195.00 a week. He actually would have paid about twice as much for his Prius. Gas costs can also vary a lot too. If Casper were driving a 6 cylinder car for example, his expenditures might be closer to $5,500.00 a year. Then, of course, maintenance costs vary widely, so same thing for car washes and pretty much anything else you might need as a driver.

Meals, entertainment, and tolls add up

Regardless of which method you use for auto expenses, there are other expenses you can track and deduct too. Meals and entertainment can net you a big deduction if you’ve got the records to back them up. As you can see here, Casper actually spent $1,419.00 on this in 2015. You can also see that QuickBooks Self Employed automatically applies 50% as a deduction. Tolls and parking can also be deducted in addition to your vehicle expenses, and you can also deduct your healthcare expenses. You can’t deduct your tickets though.

Related: How to track your expenses in a spreadsheet

Standard deduction or actual expenses?

It’s important to remember that expenses and deductions are different. Mileage is one of your most important expenses and deductions but tracking your expenses will actually allow you to determine whether your using the actual or standard method will get you a bigger deduction. On the tax summary screen here you can see that using the standard method actually results in $13,000.00 more in deductions. That’s some pretty big money but you can only figure out which method is best if you have records of your expense data and that’s where a program like QuickBooks Self Employed is so useful. You can track everything. With the app, you’ll never miss a deduction and you can also rest assured you’re making the most money because you’re saving the most on income and your expenses.

Another nice thing about the QuickBooks Self Employed app and dashboard is that it actually syncs with Turbo Tax, so come tax time you can actually simplify your filing process because all of your information, all of your expenses, all of that stuff that your CPA, or that if you were to do it on your own, you would have to go and figure out at the end of the year will all be on your dashboard and you can sync it with Turbo Tax, allowing you to basically schedule, file your Schedule C without any hassle, without any problems.

You’re running a business – It’s up to you to keep great records

Whether you guys realize it or not, you’re actually out there running your own business right now. As any good business owner will tell you, it’s important to think about that income but it’s also important to think about your expenses, and unfortunately for ride share drivers, you really have to do a good job tracking all of those expenses on your own.

When it comes down to car washes, gas and maintenance you’re the one that’s responsible, and you’re the one who needs to do all that extra work to make sure that you’re able to get all the deductions that you’re entitled to. QuickBooks Self Employed is a great product that makes this process a lot easier. If you’re also looking at it from an income and deductions point of view, you’re going to be able to save a lot with deductions, but you’re also going to be able to go out and calculate your profitability.

Calculating your profitability as a driver

Profitability is a lot different than your deductions. You guys might be able to deduct 10 or $20,000.00 worth of deductions from the standard mileage rate but that doesn’t mean it’s actually costing you 10 or $20,000.00 to operate your vehicle, so that’s kind of a nice benefit of an app like this or a program in tracking in general, is that you’ll get to see all of your deductions and all of your expenses but you also get to compare that and see how your profit and loss compares.

Taxes can seem stressful because it looks like we only made $11,000.00 in a year, even though it actually turns out to be closer to $23,000.00 in profit. This process is pretty crucial though for making this ride share business work for you. You’ll have a lot of drivers who might not understand these costs. They might not understand these expenses and they may move on to something just because of lack of understanding.

If you guys go out there and do a good job of being prepared with an app like QuickBooks Self Employed, you’ll definitely be able to put yourself on a much better financial position. Make sure you stay safe out there and good luck with those taxes.

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