One of the biggest benefits to being an independent contractor for Uber and Lyft is that you can offset a large portion of the income that you make with a deduction for all the miles that you drive.
I’d like to explain what miles you can deduct as an Uber and Lyft driver. Watch my video below to see what miles to deduct, and how you can easily track them with apps. You can also read a transcript of the video below.
Even if you have no idea how many miles you’ve driven so far for Uber and Lyft, both companies do provide a summary of the miles you drove at the end of the year. But, the two companies provide a little bit different numbers and it might not be all the miles you drove during the year.
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How Uber tracks your miles
Uber actually provides the total number of miles you drove while on a trip in your tax summary at the end of the year, while Lyft provides the total number of miles you were logged in to the driver mode with the app. You’re probably thinking to yourself, “Well I drive a lot more miles than what these companies are counting,” and you’d be exactly right.
A full time driver is probably going to put at least a thousand miles a week on their car, and in 2017 the standard mileage rate deduction is 53.5 cents. So let’s say you make $1,000 and put 1,000 miles on your car, you’re going to get to deduct $535 off of that 1,000. So all that you have to pay taxes on is $465. Hopefully I did that math right, but you guys get the point. A lot of the money that you make, you’re not going to have to end up paying taxes on, and for self-employed workers that’s huge. Taxes are a lot higher for self-employed people, so definitely you want to make sure that you’re doing a really good job tracking that miles.
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What miles can drivers deduct?
There’s all these other times where you may not be logged on to the app, you may not be in driver mode, that you might be repositioning yourself, or you log off both the apps and you might be driving into the city. And so there’s quite a few times that you can actually track all of these miles and add to your totals, because obviously if you’re on a trip with an Uber or Lyft passenger those miles are going to be deductible, and Uber and Lyft provides you that information. But you’re going to need some additional reporting.
Now for a while, I lived in Long Beach, California, which is about 30 miles south of LA, and when I wanted to go make more money in the city if I got a bonus offer, I just wanted to stay busier, I’d turn on my destination filter and drive into town, and now, all of those miles whether I got a ride or not, I would treat as deductible. And the same thing at the end of the night, I would turn on that destination filter, drive home, sometimes I would get a ride, sometimes I wouldn’t, but now that 30 miles or 20 miles sometimes at the end of the night I’d end up even further, right, and now all of those miles home are deductible. So you can offset a lot of that income that you make.
Some CPAs are more aggressive than others on deductible miles
Now, this is a bit of a gray area, so it does depend on this is sort of what I’m doing personally. Taxes are obviously different for everyone and this is how I handle them. But if you guys are really doing things right, you should have a ton of deductible miles at the end of the year. In the past, some CPAs would say that miles to and from weren’t deductible, but it’s really a range depending on how aggressive certain CPAs are or aren’t. Some will say that those miles aren’t deductible, some will say that they are. Fortunately now you have this destination filter that’s available in all of the US, and you can actually use that now and I think make a pretty good argument. At least that’s what I think, that you can make a pretty good argument that all of those miles are deductible.
All of these miles that Uber and Lyft aren’t tracking your miles for you there, like miles driven while repositioning, these could all be deductible too.
What’s the best way or Uber and Lyft drivers to track mileage?
Now first, the most important thing I should say is that regardless of what method you use to track your mileage, just do something. You want to use the information from Uber and Lyft, ideally you’ll do some more on your own though, maybe it’s a pen and pad, you check your odometer at the beginning of your shift and check it at the end, maybe you have an Excel sheet, or you might use apps. Personally that’s what I use, I use apps, so I recommend a couple different options.
Stride Tax is a great free app for tracking mileage and expenses
The first one is Stride Tax. This is a free Android and iPhone app that does mileage tracking for you. It also allows you to categorize some expenses and things like that. The thing that I love most about it is that it’s free. If you’d like to sign up for Stride using our affiliate link. It’s a pretty simple app you can start and stop, and all you have to do is really remember to do that, but I think that it does a good job because it also categorizes everything throughout the year, and you can kind of have that summary at the end of the year. If you have a CPA you can send it to them, or you can kind of quickly reference it. It’s pretty simple and it’s free, and it’ll actually help you get a huge reduction.
The other option that I also like is QuickBooks Self-Employed. This is a paid app, but they also do mileage tracking of course, and they also do a little bit more. If you’re looking into invoicing, if you have private clients, or you want to see more of a wholistic view of all your profit and your loss. If you’re a full-time driver and you’re really examining profitability. If you want to compare the standard mileage versus the actual expense method, which is a little bit of a different topic, but something that some drivers do. If you’re looking to have that more data, more granular data, I think QuickBooks Self-Employed is a good option for you. Maybe not as great for beginners, but definitely as you get more advanced, as you start to care more, that’s definitely something that you can do.
Hopefully you guys like those options. If you have any questions or comments, please don’t hesitate to leave them below, or send me an email. All right, drive safe everyone!
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