When you work as a for Uber, you are classified as an independent contractor for tax purposes. For this reason, you're running your own business as a sole proprietor and are responsible for your self-employment taxes.
Let's go over the basics on what you'll owe, as well as some Uber driver taxes you should know about.
Uber driver taxes: What to be aware of
Because Uber drivers are independent contractors, this means you are running your own business as a sole proprietor. In general, this means you'll have to pay quarterly taxes, as well as file your annual income tax return.
To show whether you have a profit or loss from your business, you file IRS Schedule C, Profit or Loss From Business, with your personal tax return. On this form, you list all the income you received from Uber, as shown on your 1099 form.
Be sure to report all the income shown on your 1099. If you don't, your return will likely come under scrutiny by the IRS.
Uber driver tax deductions: Don't miss these write-offs
You only pay tax on the profit you have left after you subtract all your expenses from your business income. Taking all the Uber driver tax deductions you're entitled to can reduce the amount of taxable income you have for the year.
Your most significant deduction as an Uber driver will likely be your car expenses. You can deduct these expenses one of two ways: the standard mileage rate or the actual expense method.
The standard mileage rate allows you to deduct 58 cents per business mile you drive. The actual expense method lets you deduct the costs of things. This includes gas, repairs, depreciation, lease expenses if you lease your car and other car-related expenses.
For example, let's say you drive 1,600 miles for Uber. You can take a $928 deduction using the standard mileage rate. Of course, you'll have to accurately track your miles to know the size of your deduction.
Tax write-offs for Uber drivers: Business expenses
You can also deduct any other Uber-related business expenses you incurred. These may include:
- The cost of your cell phone. 100% deductible if you use it just for business, otherwise you can deduct the business use percentage
- Water, candies, gum and other items you provide your passengers
- Any extra insurance coverage you obtain for your business
- Fees and commissions Uber charges you. Don't deduct any fees Uber takes directly from your pay and doesn't include in the compensation listed on your 1099 form
- Home office deduction
- Parking and tolls
- Interest on a car loan (if you use the car for personal and business use, the business use percentage is deductible on Schedule C) and
- PayPal and/or credit card transaction fees you pay.
If these expenses exceed your annual Uber income, you'll have a loss. If they are less than your Uber income, you'll have a profit that you'll have to pay tax on.
You can deduct a loss from any other income you have for the year. This could include income from another job, interest, investment income, or your spouse's income (if you file jointly).
If you can't use such a loss this year, that net operating loss can be valuable in the future. You can apply it to the two previous years and get a refund of part of the tax you paid. Or, you can carry it forward to the next 10 years to reduce your tax in the future.
You also list all your deductible expenses on your Schedule C.
