Working as a rideshare driver for companies like Lyft or Uber can be a great way to make extra money as a side hustle. In addition to making your own schedules (and making quick money), being a rideshare driver also comes with an added benefit that’s easy to overlook: tax deductions for your own car.
Holding a side job like a rideshare driver makes you “self-employed” in the eyes of the IRS, allowing you to deduct business expenses when you file come tax season. A major business expense when you’re a professional driver? Your own car, parts of which you can write off, thereby reducing your taxable income and owing less to the federal government on April 15, according to Tax Outreach.
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The IRS allows independent contractors who rely on automobiles two different deduction methods related to their primary vehicles.
The first method: the standard mileage deduction. With it, independent contractors multiply the IRS mileage rate (currently $0.70 per mile) by their earned business miles (miles driven when on the clock). This flat rate also covers additional fees such as depreciation and maintenance/repair. The only costs that do not fall under the standard mileage deduction (and must be deducted separately) are tolls and parking fees.
The second, less common method: Deduct each auto expense individually, rather than including them all in the standard mileage deduction. With this method, you must write down all driving expenses: car insurance, gas and mileage costs, depreciation in value, and maintenance/repair. Be careful: This method requires strict record-keeping, which is why most contractors opt for the standard deduction.
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Regardless of which method you use, rideshare drivers can also deduct additional items like snacks or phone chargers purchased for rider use, your phone bill (most rideshare drivers use their phones to accept pickups and rides), as well as any general fees charged by your rideshare platform.
While rideshare drivers can’t deduct an entire car (even if it was purchased strictly for the side job), many of the additional costs of car ownership can be deducted come tax time. Gas, passenger amenities, maintenance and even your phone bill – all can be written off when taxes are due.