As of today, there are approximately 1 million Uber drivers across the U.S. providing rides and services to customers. Because of the pay, flexibility, and opportunity at hand, the amount of ride share drivers has increased by the numbers, reaching an estimated 4-5 million drivers worldwide. Some drivers make a few extra bucks doing strictly airport runs. Even retirees have found it to be an enjoyable part-time gig. All in all, a strong selling point of offering rideshare services is that you can work any time you want, anywhere you want. It’s not your traditional role as an employee.
With this in mind, it’s important to note that an Uber driver is considered an independent contractor, not a W-2 employee. This distinction inevitably changes the way you file your taxes, and the reason why Uber doesn’t withhold taxes from your payments. Instead, it’s up to you to report your earnings to the IRS.
What are Uber driver tax deductions?
Similar to real estate agents and construction workers, Uber drivers are eligible to deduct quite a few business expenses. Here ere are the most common tax deductions that Uber drivers can take:
- Uber fees and commissions
- Mobile phone expenses, including billing and cost of the phone
- Snacks and refreshments for passengers
- Personal protective equipment (PPE), including masks, face shields, & hand sanitizers
- Phone accessories, like chargers and mounts
- Highway and freeway tolls
- First aid kit
- Airport fees
Outside of these common business expenses, most Uber drivers find the biggest tax savings by deducting vehicle expenses. In most cases, Uber drivers decide to claim a mileage deduction for the use of your personal vehicle for business purposes,
Can Uber drivers claim mileage on taxes?
Absolutely! When it comes to rideshare services, your car is your most valuable asset. The IRS knows this, which is why every Uber driver can claim mileage on taxes to account for wear and tear over time. The best part is you can deduct total miles driven, not just the duration of a passenger’s trip. For example, you can claim mileage on the way to your ride request, after dropping off a passenger, and en route to your next rider.
Of course, the IRS does require accurate records. In order to take a mileage deduction, you’ll definitely need to keep track of all your drives. Though it might sound tedious, there’s actually an easy solution to mileage tracking. Simply download a mileage tracking app on your mobile device or tablet. With MileIQ, in particular, Uber drivers can run the app on the background of their phone while they pick up and drop off riders.
How do you deduct vehicle expenses?
There are two ways for Uber drivers to deduct the business use of your vehicle: the actual expense method and the standard mileage rate. Regardless of which method you choose, you must report these expenses on a Schedule C form.
To use the actual expense method, you must maintain records of your business expenses, including (but not limited to) fuel costs, car repairs, vehicle depreciation, auto insurance, and more.
To use the standard mileage deduction, multiply your business miles by the IRS standard mileage rate for the year. For 2022, the standard mileage rate is 58.5 cents per business mile. This option is chosen more often by Uber drivers for its efficiency and accuracy.
Do Uber drivers pay a lot in taxes?
That answer typically depends on the driver. However, all independent contractors must pay self-employment tax if they make more than $400 in income. The self-employment rate is 15.3% of your net earnings and consists of social security and medicare costs. If you fail to take advantage of the mileage deduction and other qualifying expenses, odds are you’ll face a bigger tax bill. With that said, Uber drivers can pretty much deduct any expense in relation to their rideshare business. Here are several other business expenses to consider as write-offs:
- Business taxes and licenses
- Highway and freeway tolls
- Emergency roadside kit
- Airport entry/parking fees
- Bridge tolls
As noted, you must hold onto any receipts, invoices, and other documentation that validates these business expenses. You’ll want as much proof as possible to avoid IRS scrutiny. Remember, the IRS has a three-year period from the time you file to request an audit. Keep your records just in case.
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