Taxes & Recordkeeping For Uber, Lyft & Other Rideshare Drivers
The rise of the sharing economy brings about a great deal of tax concerns, whether you rent out your home on Airbnb or pick up groceries on Instacart. Rideshare services like Uber and Lyft are a fact of life today. Whether you drive for these apps full-time or as a side hustle, you'll get a 1099 so the IRS gets a copy and you have to report this income on your tax return. What to do?
Do Lyft, Uber, Sidecar, etc. Drivers Have to Pay Self-Employment Tax?
Yes. When you work for a rideshare app, you're not considered an employee of the company so you're subject to self-employment tax. However, the good news is that there are ways to help mitigate how much you'll owe by deducting your related expenses which are primarily car-related.
What Kinds of Expenses Can I Deduct?
Unless you have a car specially meant for driving for Uber and Lyft, you must figure out a business percent of your personal car for your auto expenses. This would include:
- Gas
- Insurance
- License and registration
- Repairs and maintenance
- Cleaning and car wash
- Leasing a car
- Car payments (with some limits)
You can always deduct parking fees and tolls in full provided that it's for when you're on duty with Uber or Lyft, but devices like EZ-Pass would have to use the business percent if you also use it in your personal driving. Speeding tickets and other fines are never deductible.
Other common expenses for rideshare drivers that aren't subject to the business percent would include things like mints, bottled water, and other refreshments that you stock for your passengers.
How Should I Keep Track of My Car Expenses?
When it comes to deducting auto expenses for rideshare drivers, you need to keep good time logs and mileage logs of when you're on duty and when you're not. Based on how much time and mileage you're putting in as a rideshare driver, you need to compare this to how often you use your car on your own time in order to figure out your business percentage.
If you're bound to lose things like gas receipts, you can also use the standard mileage method to figure out your deduction. The IRS sets a business mileage rate every year, it is $0.575/mile for the 2015 tax year but you can only use one method. If you live in an area where gas and other car-related expenses have relatively low costs, it might benefit you more to use the standard mileage method. You can still deduct tolls in full, but can't deduct your other car expenses. Whereas if you live in an area where maintaining your car is pretty expensive, it probably pays to keep good records of how much you pay for gas, license renewal, and car payments among other things.
Keeping good mileage logs is important so that you can not only prove you're using your car for business reasons, but also so you can compare which way to deduct auto expenses will save you the most on taxes.
Dukhon Tax is available for any questions and concerns about Uber driver taxes and helping you determine whether your actual auto expenses or the standard mileage is best for cutting your tax bill.
Source: Standard Mileage Rates
Frequently Asked Questions about Healthcare and Your Taxes
Because of changes initiated by the Affordable Care Act, your healthcare costs during the year now affect your taxes more than they ever did before. Below are some of the most frequently asked questions with regard to healthcare and income taxes to help you prepare your 2015 return.
1. Am I required to have health insurance?
Under the ACA, most people are required to purchase health insurance or pay a penalty. However, if you have low household income or you qualify for a hardship exemption, you may not have to pay the penalty for failing to buy health insurance.
2. What happens if I don't buy health insurance?
If you are required to purchase health insurance under the ACA but you don't have any, you will owe a penalty for every month you didn't have health insurance during the year. The amount of the penalty depends on the number of months for which you didn't have health insurance, the tax year and the size of your family.
3. What forms will I receive if I had health insurance during the year?
Depending on the specifics of your situation, you may receive Form 1095-A, 1095-B or 1095-C. Form 1095-A comes from the Health Insurance Marketplace, Form 1095-B comes from health insurance companies and Form 1095-C comes from employers who provide self-insured coverage.
4. When will I receive these forms?
For the 2015 tax year, you should receive Form 1095-A by February 1, 2016. Forms 1095-B and 1095-C should be received by March 31, 2016.
5. What information do I need to include on my tax return?
In order to complete your income tax return, you may need to know which months you were covered, what you paid for health insurance policy, the price of your second lowest cost silver plan and the amount of advance tax credit you received, if any.
6. Does the ACA require me to file an income tax return?
If you received an advance premium tax credit or enrolled in a health insurance plan through the Marketplace you will need to file an income tax return. You should also complete a tax return if you think you may qualify for a credit that you didn't receive during the year.
7. What if I don't receive the forms I need?
If you don't receive the forms you were expecting, you can still complete your tax return using your insurance cards, statements from your insurance company, records of advance premium credits and other documents. You can also request a copy of any forms you didn't receive by contacting the issuer.