Tax Deductions for Uber/Lyft & DoorDash Delivery Drivers
If you were an Uber /Lyft Driver or did delivery services through DoorDash you are considered an Independent Contractor.
How are you tax?
Typically, if you work as an employee, your employer withhold tax from your paycheck to apply it to your FICA taxes which stands for Federal Income Insurance Contribution Act. These taxes cover social security and Medicare payments.
Ex.) When you work for an employer
You pay:
6.2% social Security
1.45 tax for Medicare
Your Employer:
6.2% social Security
1.45 tax for Medicare
Total: 15.3%
When Self Employed:
You are responsible for the 15.3% FICA tax. The goodness is that you can write it off.
Additionally, you are also responsible for federal and state taxes and the rates vary and depend on your annual income and the state you live in.
What tax forms and documents do you need to file?
Typically, you will be issued a 1099- NEC or 1099- MISC showing how much your total earning was for the year.
What can you write off?
From the total earnings, you can deduct certain business-related expenses such as:
1.Your biggest expense will likely be your Vehicle.
There are two ways you can deduct the business use of your vehicle:
Standard mileage rate - 58.5 cents/ mile for 2022
ex) 10,000 business miles
X .585 standard mileage
—------------------------------
$5,850.00 deduction
Actual Expense Method
Able to write off actual expenses which includes gas, insurance, repairs and maintenance, auto loan interest, vehicle depreciation and more.
2. Parking & Toll Expenses
Parking fees, tickets, highway tolls and airport fees accrued while working as a contractor is deductible.
3.Cell Phone Expenses
You utilize your phone to get on the app and GPS to service customers so you can write off phone expenses including billing, cost of the phone or accessories such as chargers and mounts. Keep in mind it is limited to the business usage of the phone so if you utilize the phone for personal use, you can write off the portion that it is used for business.
4.Health Insurance
Self employed individuals can write off the amount they pay for health insurance coverage.
5.Supplies
Any supplies utilized to enhance /improve customer experience or bring in more business or tips can be a write off.
Disclaimer:
Have a recordkeeping system to clearly distinguish your personal and business expenses. What I like to do is get an EIN and the forms necessary to open up a business account where I can track the income and expenses that are associated with the work I am doing as an independent contractor.
Thank you for tuning in and click HERE to get expert help in filing yourself employment taxes.
Until next time, make moves that will move you forward.