If you drive for Uber, Lyft, or another rideshare platform, you're generally considered an independent contractor. That means you're responsible for reporting your income, paying self-employment taxes, and keeping records of your business expenses.
The good news is that you may be able to deduct many of the ordinary and necessary expenses you incur while operating your rideshare business. Taking all eligible deductions can help reduce your taxable income and lower your overall tax bill.
Vehicle Expenses
For most rideshare drivers, vehicle expenses are the largest deduction available.
You generally have two options:
- Standard Mileage Rate
- Actual Vehicle Expenses
You must keep a mileage log regardless of which method you choose. Your records should include:
- Business miles driven
- Total miles driven during the year
- Dates of travel
- Destinations
- Business purpose of each trip
Standard Mileage Rate
The standard mileage rate allows you to deduct a set amount for each business mile driven.
This method is often simpler because the rate already includes many vehicle-related costs, such as:
- Gas
- Maintenance
- Repairs
- Depreciation
- Insurance
If you use the standard mileage method, you generally can't separately deduct those same vehicle expenses.
Actual Vehicle Expenses
Instead of using the standard mileage rate, you may choose to deduct the business portion of your actual vehicle expenses.
Common actual expenses include:
- Gasoline
- Oil changes
- Tires
- Repairs and maintenance
- Auto insurance
- Vehicle registration fees (when deductible under state rules)
- Car washes
- Lease payments (business-use portion)
- Depreciation (for owned vehicles)
- Vehicle loan interest (business-use portion)
If you use actual expenses, only the percentage attributable to business use may be deducted.
Lease Payments
If you lease your vehicle, you may be able to deduct the business-use portion of your lease payments.
Within the program, report lease payments under:
Federal → Income → Profit or Loss From Business (Schedule C) → General Expenses → Rent or Lease of Property
Be sure to prorate the expense based on your business-use percentage.
Depreciation for Owned Vehicles
If you own your vehicle, you may be eligible to claim depreciation. Depreciation allows you to recover the cost of the vehicle over time through annual deductions.
Within the program, depreciation is entered through the vehicle asset section on Schedule C.
Cell Phone and Wireless Service
Your smartphone is often essential for accepting rides, using navigation, communicating with passengers, and managing your rideshare account.
Because of that, you may deduct:
- The business portion of your cell phone cost
- The business portion of your monthly wireless service plan
If you use a separate phone exclusively for your rideshare business, the entire cost may be deductible.
Vehicle Loan Interest
If you financed your vehicle, the business-use portion of the interest paid on the loan may be deductible. Only the percentage related to business use can be claimed.
Registration Fees
In some situations, vehicle registration fees may be deductible as part of your actual vehicle expenses. If you choose the standard mileage method, these fees generally cannot also be deducted as actual vehicle expenses.
Maintenance and Repairs
If you use the actual expense method, you may deduct the business portion of expenses necessary to keep your vehicle operating safely and efficiently.
Examples include:
- Oil changes
- Tires
- Brake service
- Inspections
- Mechanical repairs
- Routine maintenance
These expenses aren't separately deductible if you're using the standard mileage rate.
Auto Insurance
If you use the actual expense method, you may deduct the business portion of your auto insurance premiums.
Drivers who use the standard mileage rate generally cannot separately deduct insurance costs that are already factored into that rate.
Food and Drinks for Passengers
Some rideshare drivers provide bottled water, snacks, or similar refreshments to passengers. These costs may be deductible as a business expense. In general, only 50% of the cost of food and beverages provided in connection with the business is deductible.
Car Washes and Vehicle Cleaning
Your vehicle is the face of your rideshare business.
Expenses paid to keep your vehicle clean and presentable, such as:
- Car washes
- Interior cleaning
- Detailing services
may qualify as ordinary and necessary business expenses.
Roadside Assistance Memberships
If you purchased a roadside assistance membership, such as AAA, specifically because of your rideshare business, the business-related portion may be deductible.
Parking Fees and Tolls
Parking fees and tolls incurred while actively conducting business are generally deductible.
Examples include:
- Airport pickup fees
- Toll road charges
- Parking expenses related to rideshare activity
Be sure to keep receipts or electronic records whenever possible.
Keeping Good Records
The IRS expects self-employed individuals to maintain adequate records supporting their deductions.
Consider keeping:
- Mileage logs
- Receipts
- Bank statements
- Credit card records
- App-based expense tracking reports
- Uber and Lyft annual summaries
If a receipt doesn't clearly explain the business purpose, make a note showing:
- Purchase date
- Amount paid
- Business purpose
- Items purchased
Good documentation can help support your deductions if the IRS requests additional information.
How to Enter Rideshare Expenses in the Program
General Business Expenses
To enter non-vehicle expenses:
- Go to Federal
- Select Income
- Select Profit or Loss From Business (Schedule C)
- Choose General Expenses
Enter expenses such as:
- Cell phone expenses
- Wireless service
- Supplies
- Passenger amenities
- Membership fees
- Lease payments
Vehicle Expenses and Depreciation
To enter actual vehicle expenses or depreciation:
- Go to Federal
- Select Income
- Select Profit or Loss From Business (Schedule C)
- Select Depreciation
- Choose Assets
- Select Listed Property
This area is used to report vehicle information, depreciation, mileage, and other vehicle-related expenses.
Additional Information
Review this Knowledgebase article Schedule C - Expenses and IRS Publication 463 for additional information.