10 Tax deduction tips for Uber Driver-Partners

After the pandemic, rideshare demand grew significantly and many more drivers needed to join the ranks. If you are one of those who joined Uber as a driver-partner, this may be the first time you’re doing your taxes as an independent contractor, which means that the IRS will consider you to be self-employed.

As a self-employed individual, you’re going to have different tax concerns than an employee would. Knowing the difference between the two is especially important at tax time. And, if you’re an Uber driver-partner, there are a few things you’ll want to be aware of. Here are 10 tips to save as much as possible when it comes time to pay your taxes.

1. Only pay income tax if you make more than $600 annually

As a sole proprietor, you only need to file a tax return and pay income tax if you earn $600 or more from driving for Uber in a year. The IRS does not require you to file a tax return if the work you did for Uber did not exceed that amount.

One way to know if it did is if Uber sends you a 1099 form. This is the form that Uber or any company is required by law to send to any independent contractor if they paid them $600 or more. It reports those payments to the IRS, so the government is aware of the income you’re required to pay taxes on. Companies are also supposed to send you a copy of the 1099 they send to the IRS.

Remember to pay self-employment taxes

Because driver-partners are not considered employees, Uber does not withhold income tax or self-employment tax from their paychecks like an employer does. Self-employment tax covers Social Security and Medicare tax, and it’s 15.3% of your income.

You can use Schedule SE to calculate the self-employment tax you owe.

3. Pay estimated taxes every quarter

Quarterly estimated taxes are probably one of the biggest headaches a self-employed person has. For one thing, you’ve got to remember the deadlines for each quarterly payment, and you have to know how much to pay. Your quarterly payments need to be at least 90% of your taxes owed.

Fortunately, there are tools out there like FlyFin, with its automatic deadline notifications and  quarterly tax calculator to make this part of being an Uber driver-partner much easier.

4. Use Schedule C to report your income

As a self-employed person, any Uber driver-partner is going to live and die (tax-wise) by this form. It’s where you’ll report to the IRS how much you earned, and therefore how much tax you owe. Fortunately, the story doesn’t end there. Tax write-offs can drastically change how much you owe in tax. More on that below.

5. Deduct business expenses

Uber driver-partners can deduct the cost of things they use to keep their car on the road and to provide their service. That means oil changes and car repairs, as well as cell phone charges and subscriptions to play music for their passengers are all tax deductible.

6. Deduct mileage

Anyone who drives a car for a living is probably aware of the mileage deduction. For every mile you drive, the IRS allows you to deduct 56 cents from your taxable income in 2022. That’s only if you choose the standard mileage deduction method, rather than the actual expenses method mentioned above.

You can still claim a few write-offs even when you choose the standard mileage method, like parking fees, cost of car washes, registration fees and tolls. The standard mileage method essentially covers your cost of depreciation, maintenance and gas costs.

You’ve got to choose one method or the other, and though the standard deduction method is faster and easier, you have a better chance of saving more with the actual cost method.

7. Keep a mileage log

This is obvious if you’re using the standard mileage deduction method, but it bears mentioning that if you’re deducting mileage, you should be keeping a log of the miles you drive. You might be tempted to estimate the miles you drive on your tax forms at the end of the year, but the IRS won’t accept that if they ask you to prove the miles you drive.

8. Use an app instead of keeping receipts

Uber drivers are used to having to save their receipts and keep track of their business expenses using spreadsheets like any self-employed person would. This was how they would know what to write-off from their taxes at the end of the year.

Today, there are apps like FlyFin to make this about 95% easier. All a driver has to do is connect their bank statements and let the A.I.-powered tax engine automatically find every possible tax write-off.

9. Know your gross income

When you go to your driver dashboard, make sure you understand that Uber shows your income amount before they’ve taken their share. The 1099 you should receive from Uber is what you should use as your gross income for calculating your income tax.

10. Keep a separate bank account for your business

This is an easy way to keep your business expenses separate from your personal expenses. That way, your business expenses are already categorized, making it much easier on you at tax time.

Speaking of making taxes easier, these tips are essential for any Uber driver. Along with more tips like these, FlyFin gives you 24/7 access in the app to a team of expert tax CPAs for any question you have about independent contractor taxes. You’ve been road-ready for a while. Now you should be ready for any tax issues working as an Uber driver might throw at you.

FlyFin CPA Team

FlyFin CPA Team

With a combined 150 years of experience, FlyFin's CPA tax team includes tax CPAs, IRS Enrolled Agents and other tax professionals, offering users the most comprehensive tax advice and preparation.

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