It’s never too early in the year (or too late) to think about taxes. As an independent contractor, your taxes are a major expense, and figuring out how to track expenses and fill out tax forms can be stressful. UberMan has a good brief video about taxes that’s a great resource for both new and experienced drivers.
Take a look at UberMan’s video, and if you like to read, check out the video transcript below.
I’m going to try to make this short, sweet and to the point in regards to taxes. This is probably the most important video you can watch. It’s very important that you understand how taxes work for rideshare drivers and that you use the best method for your individual situation.
The two ways to think do your taxes as a driver
There are two methods that you can use. One is the actual expense method, and it is probably the less popular of the two, because actual expense method require that you save all receipts for every single thing. Every fuel fill up, every oil change, every air filter, every set of windshield wipers, every single thing throughout the entire year, you need to have a receipt for it. Then, you get the opportunity to import them into your taxes at the end of the year, which is absolutely fun.
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Your mileage will be your biggest write-off. But which miles count?
We’re not going to talk about that ,method because typically that’s not what a rideshare driver’s going to choose. Instead we are going to choose the standard deduction. Now, what the standard deduction will give you for 2017, you’re going to get 53.5 cents per mile driven. What miles are included? That’s probably one of the biggest questions I get. What miles can you write off? Well, obviously, you can write off miles when you have a passenger in your car. What a lot of drivers don’t realize is that you can write off the mileage to picking up a passenger. You can write off the mileage after dropping the passenger off and returning to a location to get pings. That mileage is deductible as well. You can write mileage off as long as you are driving around basically with the app on. If the app is on and you’re looking for runs or you are on a run or you’re coming back from a run, every one of those miles absolutely count.
How to efficiently track your mileage
The most basic method is a notebook and a pen. I’m serious, so let me tell you how I do it. Now, you can use all kinds of different apps and mileage tracking devices, that is absolutely fine, but I prefer to keep a paper log in the event that I’m ever audited, I want to have that handy. So, it’s really simple. What I do, is the date that I’m going to go drive, I write down the date, I write down the time, I write down my starting mileage and then when I am done driving for that time frame, I write my ending mileage. I do the same thing every time I go back out to drive. Starting mileage, ending mileage, date, time. It’s that simple. There you have a mileage log that you can use at the end of the year.
Now, if you’re like me you’ll want to use an expense tracker like Intuit, QuickBooks. I use an expense tracker that’s directly linked to my bank account so I can click on business or personal. Business, personal, business, personal, it makes it really simple to do. All you have to do guys, is add the mileage in. Do it weekly. Once a week go through your paper log and then import it into your favorite tracking software, problem solved.
Stride Tax is another great mileage and expense tracker that many drivers use.
What other expenses can you write off?
There are all kinds of things that you can deduct as a business expense, and it’s important that you claim every legitimate expense that you can, to offset the amount of taxes Uncle Sam is going to want from you at the end of the year. So, what can you write off as a legitimate tax deduction? Did you buy a new phone for work? Okay. That is a business expense. Now, if you bought the entire phone and plan solely for the purpose of doing ridesharing, that is 100% tax deductible, the purchase price of the device and the price of the contract associated with it.
Now, let’s say like most people, that is not your situation. Let’s say, 60% of the plan is for personal use, and 40% is actually associated with driving or making money. In that case, 40% of the plan is deductible, 40% of the cell phone is deductible. And that is pretty much the case with just about everything that is going to be split between business and personal use. You can write off the business portion by simply figuring out to the best of your ability, what percentage is used for personal use and what percentage is used for business use.
There’s tons of other things you can write off as a legitimate deduction. Car washes are obviously necessary to keep your car clean or if you take your car to a detail shop and let somebody else detail it. That is a legitimate business expense as well. You can absolutely write all of that off. Did you buy aux cords? Do you have SiriusXM Radio for your passengers? All of that is tax deductible. Do you have chargers for your passengers? Tax deductible. Do you provide candy or water or gum or any of the other miscellaneous items, tax deductible. Cleaning supplies, vomit bags, in case someone makes a mess, tax deductible. Did you buy a portable vacuum cleaner to keep your car clean in between passengers? Tax deductible. Did you buy a dash cam to protect yourself in the event something happens on a ride? Tax deductible. Did you have to pay for an inspection before you could get on board with Uber or Lift or one of these other services? Tax deductible. Did you have to pay for a background check? Tax deductible. Are there parking fees associated with doing what you do for a living? Tax deductible. Do you have to pay for tolls?
As most of you know, Uber and Lyft will pay for a toll as long as a passenger is in the car. But, if you use a turnpike and it charges you a toll fee when you do not have a passenger in the car, you’re not entitled to reimbursement. That portion of the toll is considered a legitimate tax deduction as well. As I mentioned earlier, things like SiriusXM or Pandora, any of these other music services that you purchase to provide for your passengers, tax deductible. Do you have a WiFi hotspot, that’s for your passenger’s use? Tax deductible. Now, again, if that’s split between personal and business, make sure that you split that up instead of trying to write the whole thing off, because you don’t want to get caught with your pants down in an audit. Again, these are things that are absolutely tax deductible.
Did you get roadside assistance? Tax deductible. What about phone holders, floor mats? Tax deductible. Let’s say you work a lot of hours, you know, unusually long hours a day or for a week, are your meals deductible? Yes, absolutely they are. You can get 50% reimbursed for your meals in the event that you work an extra long shift, or several extra long shifts in a week.
If you want help calculating all of your expenses, Stride Tax is a good free tool.
Another big hidden write off
Here’s another big one that a lot of you probably don’t know about. You can actually write off interest and personal property tax as a tax deduction. You can actually deduct the interest from your automobile loan, as well as state and personal, local property tax as a separate items. It’s 100% a tax deduction. Now, again, you have to determine what percentage of your vehicle is used for business, what percentage is used for personal use and then you have to figure out the percentage of the interest as well as the taxes and everything else. You can still use that as a tax deduction and I’m telling you guys, you want every deduction you can get your hands on, so you can keep more of your money in your pocket.
Health insurance is another one. This is limited to business income after expenses, but that’s also a tax deduction. So guys, that’s it for the video. I hope this video finds you in good health and prosperity. I am always here trying to inform you, to help you make money, help you save money, always keeping more money in your pocket. Until next time!
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