Working For Uber and Lyft? Here’s How To Pay Your Taxes

If you make more than $400 driving for Uber or Lyft, you are required to report this income to the IRS, and it's eligible to be taxed. Usually, as an Uber or Lyft driver, you'll report your income as a sole proprietor. Even if you make less than $400 from Uber or Lyft, you still need to report your income when you file Uber driver taxes.

You might be wondering, does Uber take out taxes? According to Uber, the company considers its drivers to be independent contractors who provide a service. If you drive for them, you're not considered an employee of Uber so Uber won't be withholding any of your taxes or reporting your earnings on a W-2 tax form. Instead, you'll receive your earnings on an Uber 1099 form and be responsible for paying your Uber driver taxes.

Uber and Lyft drivers pay two types of taxes: self-employment and income taxes. The amount you’ll owe in income taxes depends on the amount of money you make, the type of income you earn, your tax bracket and your filing status. Any deductions you claim will be subtracted from your gross income, and any tax credits you receive will be subtracted from the tax you owe. You are also responsible for paying self-employment taxes as you’re considered to be an independent contractor by the IRS. This tax is paid to the federal government to cover your contribution toward Social Security and Medicare. Typically, when you work for an employer and are under their payroll, your employer will withhold some of these contributions from your pay, and the other part is paid by your employer. But you're self-employed, you're both the "employer" and the "employee" and are responsible for paying all of the 15.3% tax. The self-employment tax is paid in addition to any other tax you might owe on your income. And you make quarterly tax payments to the IRS to cover this tax.

Uber or Lyft drivers will receive Form 1099-K from their ridesharing platform if they made over $5,000 in payments and had over 1 or more rides in a year. The IRS initially planned to revise the 1099-K reporting criteria for the 2023 tax year. However, they opted to postpone the implementation of the proposed $600 reporting threshold for transactions processed by third-party entities. The tax year 2024 will maintain the existing 1099-K reporting threshold, requiring individuals to report payments exceeding $5,000 or involving more than 1 or more transactions. Uber or Lyft drivers can also receive a 1099-NEC form if they made over $600 in non-rider income like referrals and promotions.

Drivers can access and download their 1099 tax forms from their “Driver dashboard” by January 31. You can also choose to have your Uber 1099 or Lyft 1099 forms mailed to you by updating your preferences in the same dashboard.

If your delivery driver income doesn’t cross the income threshold, Uber or Lyft will not send you a 1099 form. However, you will still need to report this income to the IRS. You can look at your bank statements to calculate your income or use FlyFin’s built-in income tracker. Your income will be reported on Schedule C along with all your Uber and Lyft tax deductions. Once you calculate your taxable income (Earned income - deductions), you can calculate your self-employed tax on Schedule SE and report it on Form 1040.

When you work as a driver for Uber or Lyft, you are considered a self-employed individual. Self-employed individuals must pay estimated quarterly taxes four times a year. If you expect to owe at least $1,000 in taxes for the year from your driving gig, you’ll most likely need to pay estimated quarterly taxes using Form 1040-ES.

When it comes to Uber Eats taxes, you’ll be happy to know that they work the same way as Uber driver taxes. With Uber Eats taxes, you still need to pay taxes on any income you earned as a driver, plus the self-employment taxes. If you drive for both Uber and Uber Eats, your earnings from both services are combined to decide if you meet the requirements for tax forms like the 1099-K and 1099-NEC. You'll get one tax summary covering all your activities with both platforms. If you use different emails for Uber Eats and Uber, your earnings from each service are considered separately for tax forms like the 1099-K, 1099-NEC, and/or 1099-MISC. You'll receive two tax summaries: one for your Uber Eats activity and another for Uber.

Your Uber 1099 form can help drivers calculate and file Uber taxes. You can take Uber tax deductions to lower your tax liability. A 1099 tax calculator can help self-employed individuals easily find delivery driver tax deductions.

There's no denying that your car gets a lot of wear and tear working as an Uber or Lyft driver. The good news is that you can claim deductions for the miles you drove and the upkeep of your car to lower your Uber driver taxes. Tax deductible miles include:

• Miles driven with riders
• Miles driven to pick up riders
• Miles driven after dropping off a rider on the way to wait in a set location for another rider

All business-related miles can be deducted. Make sure you keep all the receipts for the driving for your tax return as proof of any deductions. However, you can’t claim any miles en route to or from your home without any passengers, also known as “commuting miles.” You have two options when it comes to claiming mileage deductions for drivers:

• Standard mileage method:This method is the most common and simplest option. For this deduction, multiply the standard mileage rate by the number of business miles driven. The rate for the 2024 tax year is $0.67. With this deduction, you can’t deduct any other expenses but you can deduct parking fees and tolls.
• Actual expenses method:With this option, you can deduct the actual cost of maintaining your vehicle, including car repairs, oil changes, car washes, license fees or gas. This option is a bit more complicated, so it’s best to use a car mileage tax calculator to help you find your deduction amount.

Some drivers like to maximize their time on the road and simultaneously fulfill orders for other delivery services such as Postmates, Doordash, Instacart or Grubhub.

It’s basically impossible to drive for Uber or Lyft without a cell phone. Since your cell phone is being used as part of a business expense, it’s eligible for a tax deduction. You can deduct the cell phone cost, accessories, and your monthly cell phone bill. But remember, you’re only allowed to deduct the amount that’s used for business. Some drivers even get a brand-new phone and dedicate it solely to their ridesharing gig.