Being a Lyft driver is an excellent way to earn some money but be sure you know about your tax liability and deductions. Let's go over a Lyft driver taxes, so you'll be ready come tax time. Keep in mind; these tips will apply for Uber driver taxes, too.
Yes. And, it's not as straightforward as if you were a W-2 employee.
Because you're running your own business, you will be expected to pay the Self-Employment Tax if you foresee to make over $400 in net earnings for the year. Plan on paying this tax each quarter. Of course, you'll also have to file your annual tax return.
Thankfully, Lyft drivers can access a dashboard with their yearly stats. The collected info includes the number of rides, non-ride earnings, tolls, gross earnings from rides, and miles driven while in driver mode.
If you drive for Lyft as a way to supplement your W-2 income, your taxes can get slightly more complex. Here's how to file taxes when you have a W2 and 1099.
The ride-sharing company makes it clear that you're are not considered an employee of Lyft. Instead, you're an independent contractor.
That means you're a non-employee who is running your own business. Lyft also doesn't provide employee benefits like vacation time or health insurance. It does offer its drives some useful resources, though.
Lyft will file IRS form 1099-K for specific drivers. These drivers gave at least 200 rides and generated $20,000 in gross ride receipts. Lyft drivers who earned at least $600 from activities other than driving in the last year will get a Form 1099-MISC. These activities could include bonuses, mentoring and more.
Tax deductions can lower your yearly income, which could lead to a lower tax hit. Simply put, the more deductions you're eligible for, the fewer taxes you'll have to pay, and that means more money in your pocket.
For most of you out there, the biggest expense associated with being a Lyft driver is your car. As a driver, one of the best ways to limit your tax liability is to take a mileage deduction.
The only way to get this deduction is to track your miles accurately. Lyft provides records of your drives, but it may not track all your business miles. For example, Lyft will track your drives with passengers and maybe even to pick up passengers, but other trips could save you at tax time. Your drives to busy areas to pick up passengers could potentially be tax-deductible trips, too.
Yes, Lyft is required to report your earnings to the IRS if you've earned more than $600 during the year.
You can write off more than just miles. Nearly anything you spend for your Lyft business can lead to a tax deduction as long as these costs are:
These business costs could include things like gum, water and candy you hand out to passengers. It could also include the cost of software to track your miles, keep your records straight and more. Don't forget. You can also deduct the cost of parking and tolls if they're related to your business.