Unit 5 – Uber Driver Taxes
This unit will cover the basics for Uber Driver Taxes. As an Uber driver you are an independent contractor. You are responsible for paying your own taxes on your Uber earnings! You may want to set aside as much as 30% to pay for taxes at the end of the year.
The most important thing you need to realize is Uber does NOT deduct for taxes. YOU are responsible to pay taxes on your earnings as an Uber driver.
In this until we will cover two main components of Uber driver taxes. In part 1 we will discuss ideas for potential tax deductions. In part 2 we will discuss where to find the tax forms to file your taxes.
General Uber Driver Tax Advice
We are not accountants or tax professionals. We can point you in the right direction and give you some tips to help lower your Uber driver taxes. However, you should seek a tax professional to verify all your deductions. We cannot provide tax advice. Only a certified tax professional can.
Uber recommends H&R Block or Intuit Turbo Tax. Keep in mind that Turbo Tax is software for you to do your own taxes. H&R Block is a company that has certified tax professionals to help you.
The maximum tax rate in the US is 39.6%. However, that also means you have an income of over $415,000 after all your deductions. I don’t expect any of us Uber drivers to be earning that kind of money. If so we wouldn’t need to drive for Uber 😉
It is usually suggested to set aside 30% of your earnings as an independent contractor for taxes. If you have a lot of deductions, you will be able to lower your “earnings” as an Uber driver. You will need these savings to pay your tax bill come April 15th when taxes are due. We’ll cover more about potential tax deductions in the next section.
Potential Uber Driver Tax Deductions
There are quite a few things you may be able to deduct from your taxes as an Uber driver. The more deductions you have the lower your tax bill will be. We can only offer some general advice. You need to contact a tax professional to determine whether or not you can claim all of these deductions or not.
The biggest decision you will face on your Uber driver taxes each year is:
Do I take the standard mileage tax deduction or do I itemize my deductions while driving for Uber?
The standard mileage tax deduction for 2016 is 54¢ per mile. In 2015 it was a bit higher at 57.5¢. (Gas cost more in 2015)
An itemized deduction means you keep track of all your receipts while driving. This may include items like gas, car washes, brakes, tires, oil changes and other expenses. You need to keep track of ALL your receipts to properly itemize deductions. If audited the IRS wants to see each receipt. This could be up to 7 years later so you also want to make sure you make photo copies of all your receipts. Sometimes the thermal printer paper the receipt machines use fade quickly. If you don’t make a photo copy after a year or two you may find some of your receipts are no longer readable.
Itemized deductions also allow you to do things like deduct for your automobile depreciation, registration fees, and lease payments.
If you are going to itemize deductions, you will want to use an app like Expensify. Expensify has apps for both iOS and Android. Their app allows you to take photos of your receipts on your phone and store them in the cloud. You can then go back and classify your receipts and at the end of the year you can download a report to provide to your tax professional. If you make a habit of taking photos of your receipts with your phone you don’t have to worry as much about losing a receipt.
Most people prefer to take the standard mileage deduction. The reason for this is that they don’t have to keep track of all receipts and it is easier to file the taxes. Instead of having to account for all your receipts, categorize them, and tally them at the end of the year… You simply track your mileage and put that into the tax form. If you’re paying a tax professional it also means a lot less time for your professional to write up your taxes. If they have to go through and double check your receipts or do additional work for each receipt it could mean several hours more time which you have to pay for.
Talk to your accountant if you are selecting the standard mileage deduction. You may be able to add things like your car washes and detailing as an additional expense!
I use the standard deduction simply because I don’t want to deal with all the headaches.
Expensify also has the option to help you track mileage. There are also other apps for helping track mileage as well. Some apps like MileIQ are designed just to help you track your mileage.
Sherpashare is an app to track mileage that is written for rideshare drivers. This app tracks your mileage, your tax deduction, and your earnings. You can give Sherpashare permission to connect with your Uber account. They track your earnings in your dashboard, your hours driven, and your mileage. You can even put in your average cost per gas and average gas mileage. They’ll attempt to give you a snapshot of your actual earnings after expenses and including the standard 54¢ tax deduction. Sherpashare is also branching out into other aspects like providing a way for drivers to communicate with one another. Sherpashare used to be free but now has a fee. The first 60 trips a month are free. This includes your personal trips as well so it is easy to eat up those 60 trips. Unlimited trips are $5 a month, $25 for 6 months, or $45 for a year.
One potential downside of Sherpashare is they collect and share your driving information with others. They compile data for all drivers to create heat maps for each city. This shows what areas of the city may be better for drivers. Some people may not want this information shared with other drivers.
The three apps we recommend for tracking tax deductions such as mileage include:
- Expensify – track mileage, receipts, and more
- MileIQ – track mileage
- Sherpashare – mileage tracking and more for rideshare drivers
Can I deduct for candy, gum, water, or other items I provide my passengers?
If you purchase these items for your passengers, then yes they can be a tax deduction.
Can I deduct my cell phone bill on my Uber driver taxes?
Maybe. Do you lease an Uber phone or a phone specifically for driving? If so then yes. If you have a personal phone that you use for your Uber business and also for personal use, then it depends. It all comes down to how much you use your phone for personal use and how much for business. You may be able to deduct a portion of your cell phone bill. You will want to talk to a tax professional to find out for sure how much you can deduct.
Can I deduct mileage while driving to a location? Or only when I have a passenger?
General opinion is that you can deduct if you are online and available for passengers in the app. Even if you don’t have a passenger the fact of turning the Partner App on and being available to pick up a passenger should mean you can deduct those miles. It isn’t your fault if there isn’t an active request. You’re frequently driving trying to find where the hot spots are. Your app is on and you are looking for passengers.
If you stop for a little bit to take care of personal errands, then those miles would not be deductible. Using an app like Sherpashare, MileIQ, or Expensify can allow you to break down each trip as personal or business use.
On the other hand, let’s say you live outside of town. You drive into town to get passengers. You then turn your app on. That would not count as a deduction. That would count as “commuting” to your job which is not a tax deduction.
Check with a tax professional to be sure.
Where to Find Your Uber Driver Tax Forms
Your Uber driver tax forms will be on the Uber partner web site. By default, you will be taken to your current pay statement/earnings for this week. At the top of the page you should see a link that says “tax information”. Click that link to be taken to your tax forms.
Uber has until February 1st to make your tax forms available.
If you just started driving this year your tax forms won’t show up until next year. Uber will contact you to let you know when your tax forms are available or you can check the “tax information” of the Uber partner web site.
Your Uber Drive Taxes Downloads will look something like this:
The 1099-MISC is for independent contractors and self-employed people. We as Uber drivers classify as independent contractors. This form shows your earnings from Uber after Uber takes out their fees. This should match the actual amount that Uber deposits in your bank account. Here is an example 1099 for an Uber driver. Note that “Rasier, LLC” is the corporate business entity for Uber. Uber is a brand name they do business under.
The next tax form is a 1099-K. This is a little bit weird form because it shows your total amount your app billed passengers for rides. It includes Uber’s fee they take out, tolls, taxes, etc. This shows a lot more earnings than were actually deposited in your account because it has all this extra stuff in it. You can thank the IRS that our taxes are so complicated we have to fill out this extra form as well.
The final document isn’t a tax form. It isn’t an official tax form but simply breaks down all the totals in an easy to read summary for you. It includes your earnings, Uber fees, mileage driven, etc. Keep in mind this mileage is only a portion of the mileage you are allowed to deduct. This only includes mileage with a passenger in the vehicle. You may be able to deduct all mileage driven with the driver app in “online” mode. This is a helpful reference for you but shouldn’t be used for your taxes.
As you can see our taxes as an independent contractor are a lot more complicated than an employee who simply gets a W2 form at the end of the year. As Uber drivers our taxes include 1099-MISC and 1099-K and neither of these include our mileage and other deductions.
Hopefully this guide has given you a good starting point for your taxes. Make sure to contact a tax professional for further advice. Uber even has discounts available to you on the tax information page. They have discounts with H&R Block and also Intuit Turbo Tax.
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