We all know that the demand and usage of Uber and Lyft services have increased dramatically over the past couple of years. People who can't afford their vehicle can easily travel from one place to another with the help of these services. If you are an Uber or Lyft driver, then it becomes significantly vital that you understand the tax liabilities.

Uber is a company to which the driver needs to report different business-related expenses. However, as far as the taxes are concerned, they will not be under the company's control, and the driver has to file for the tax return on their own. This is why it is crucial to understand the aspects of tax law and tax decisions that Uber and Lyft drivers make. So, let's jump right into the article and have a look at it.

Tax Deductions for Uber and Lyft Drivers:

As an Uber and Lyft driver, there is good news. If you are a driver, then you can manage your tax return and use the tax decisions to lower your taxes. Uber and Lyft drivers can deduct a lot of expenses from their fees and reduce the amount of taxes they have to pay on a yearly basis.

Two significant kinds of tax deductions can happen. One is the operating expenses, and the other one is the vehicle expenses. Vehicle expenses can be related to the car, such as the parking tickets, the tolls, and even the mileage.

The operating expenses can be other expenses such as the fees and commissions that the Uber and Lyft companies ask for, snacks for the passengers, and even cell phone packages and plans. You must understand that tax deductions can only be made on things that are related to the business. Anything that is used for personal use can't come under the category of tax deductions.

The following are the different tax deductions that you can include when you are filing the tax return.

Standard Mileage:

Standard mileage is the first thing that you can use to reduce your taxes. If you want to calculate the standard mileage, then you need to multiply the miles your car has traveled during business hours with the standard rate. These rates do change and fluctuate; therefore, it is recommended to look into them before filing the taxes.

These rates will include different things, such as the driving costs, the repairs and maintenance of the car, the gas cost, and even the depreciation. This is why you mustn't deduct them separately because they are just mentioned in this same category.

The Car Expenses:

The next thing that can be deducted from your annual taxes is the actual car expenses. This part can be a little tricky because keeping track of all the expenses can be a little challenging as there are a lot of different things that you need to calculate. It would help if you saw the percentage of the cost of gas, repairs, insurance, and many other things related to the car.

It is suggested that you seek professional help when it comes to calculating the car expenses for tax deductions. Also, you need to keep receipts of all these expenses in order to support your decisions in the file.

Accessories:

You can even add the cost of the chargers, cables, and mounts that are used for the cars to operate them. Other accessories can be added, such as pressure gauges, portable battery jump packs, flashlights, tire inflators, and other car tools.

Here, you can even calculate the business taxes and licenses, the city and airport fees, the electronic toll transponder, and other things that are used during the ride or for the car.

How to Claim the Tax Deductions for Uber and Lyft Drivers?

Now that you know different kinds of education that can be done on the Uber and Lyft driver's tax return, you should also know the right way to claim the tax deductions.

The first thing you should do is file the Schedule C report. This report is used to show the profit to the IRS, and in this report, you will be recording all of your income and the tax deductions. This means the end taxes that you will be paying will be the net income, which is your total income minus the business tax deductions.

Then, you will also receive two other tax forms, the 1099K and the 1099NEC Form. The 1099K form is used to report the total amount of the passengers that paid for the rides. Here, all the money will be counted, including the commissions and other kinds of fees.

The 1099NEC form is used to fill in any other kinds of income that you might have received. This will include referrals and bonuses that you might receive separately from driving. You can even find your income information on the dashboard of the Uber and Lyft driver application, and according to that, you can fill out your forms.

How to Files for the Taxes and Track the Tax Deductions:

You must keep track of the tax deductions and not leave everything for the last minute. Following are some tips that can help you here.

• Create a proper system through which you can keep track of your tax decisions.
• Please make a separate bank account for your business so that it is easy for you to keep everything in place.
• Different apps can help you keep track of everything.
• Keep track of the mileage, as this is one of the biggest things that can play a role in the tax deduction.

Final Words:

The Uber and Lyft drivers are earning a decent amount of money from this business. It is also very beneficial for people as they have a convenient way of traveling. However, when it comes to taxes, you should know that there are different things that you can use to reduce your taxes. Hence, we hope this article was beneficial for you in understanding Uber and Lyft drivers can use tax deductions.