Manage your expenses
If you work for Uber or Lyft as a rideshare driver you are considered an independent contractor, which is another way of saying you can be your own boss! Not having someone else boss you around is great – you work as much as you want, when you want, but this comes with many responsibilities. One big responsibility is keeping track of your own mileage and business expenses because when you’re working as a Lyft driver or an Uber driver, you’re going to need that important info when tax time rolls around. Almost every expense of your business can be written off to save you some money. Here are a couple of suggestions to track your mileage and expenses to boost your Lyft and Uber driver tax deductions.
- Keep a detailed handwritten journal or typed data spreadsheet of your annual fuel costs, car maintenance expenses, and work mileage.
- Or, we recommend using a business expense and mileage app like SherpaShare. SherpaShare makes it easy to track and manage your rideshare finances, mileage, and expenses, making tax time a breeze. It’s free to download on IOS and Android. The app also features optimization data to help you boost your income as an Uber or Lyft driver.
- There is more than one mileage and expense tracker app to choose from, each with their own cool tracking features. Check out this extensive mileage and expense tracker list compiled by HyreCar.
You might ask yourself, How much do Uber drivers make?” Or, “What is a typical Lyft driver salary?” If you’re thinking about becoming a rideshare driver, a big question might be “How much money can I make with Uber?” These are tough questions to answer, as all drivers make different incomes depending on hours worked in a day, geographical locations, (bigger cities typically pay more per fare than smaller towns), distances traveled and for how long, time of day, and the amount of passenger tips received. “Are you supposed to tip an Uber driver?” is a question we’ll get to later. Hint: tipping the driver is always appreciated but not required of passengers.
To get a better idea of of how much rideshare drivers earn, take a look at the typical Uber driver pay:
- On average, a rideshare driver takes home between $15 and $20, before your personal expenses are subtracted. So, the actual hourly average is a bit less.
- A typical base Uber fare calculator looks like this:
Base Fare + (Minute Rate x Minutes Traveled) + (Distance Rate x Distance Traveled) + Booking Fee = Final Rider Fare
Here’s an example using real life numbers. Say you picked up a fare from the airport in Atlanta, Georgia and drove them to a conference center 11 miles away. The earning formula would look like this:
$1.00 + ($.12 x 18) + ($.81 x 11) + $2.25 = $14.32.
Now, this fare could pay closer to $19 if Uber declared a surge price due to high demand for rides during rush hour. So do you take all of that home? Unfortunately, no.
- Uber and Lyft both take a 20% commision of your earnings. Even if you did have a $19 fare, you’d end up with about $15 for that one pickup (minus taxes, gas, expenses etc). What you’d make in an typical hour would completely depend on how many more trips you could squeeze into that hour as well as the distances covered and minutes traveled.
Lowering your tax bill
Now you know how much Uber driver earnings and Lyft pay are. Do Uber drivers pay taxes? They sure do. Obviously, drivers want to keep as much of their hard earned wages as possible without turning a huge chunk over to Uncle Sam at tax time. Here are some suggestions:
The majority of rideshare drivers are independent contractors who report their Uber driver income or Lyft driver income to the Internal Revenue Service using a Schedule C tax form. However, if you form your own LLC, (limited liability company), corporation, or another form of tax entity that covers your Lyft or Uber payments, your tax bill could be considerably lower. Tax entities like these are usually accepted by rideshare companies. Always talk to a tax professional before making any changes.
- Individual/Sole Proprietor
- C Corporation
- S Corporation
- Limited Liability C Corporation
- Limited Liability S Corporation
- Limited Liability Partnership
- Disregarded entity
How to submit your Employee ID number to Uber:
- Log in at partners.uber.com
- Click the Banking tab
- Under Bank Account Details, click Edit
- Scroll to Tax Information and select your tax classification
- Enter your EIN in the “Employer ID Number” box
- Click save, and if prompted to enter a pin, check your text messages to retrieve the pin
How to submit your Employee ID number to Lyft:
- Log in at Lyft.com
- On the left menu, click “Payout Information”
- Under “W-9 Information Form,” click Edit
- This will open up a new form. Select Corporation/LLC from the drop down and enter your EIN
- Enter your electronic signature and submit
You should receive a 1099 under your corporation name in the early part of the year, around mid-January. This way the IRS knows that your Uber and Lyft income is linked to your Employee ID Number, and not your Social Security number.
Minimize your Liability by forming an LLC or corporation
There is always an element of risk when we drive our cars, but when you’re a rideshare driver, the risk increases because you’re behind the wheel more than usual. Commercial driver insurance policies, like for limo service chauffeurs, are too expensive for the average Uber or Lyft driver. Major insurance companies don’t even offer car insurance for Uber and Lyft drivers. Business experts recommend forming your own LLC or corporation to minimize your personal liability. This separates your business assets from your personal assets, just in case you were hit with a lawsuit stemming from an accident. Hopefully, this would never happen, but it’s just another way to keep and protect the personal profits you make as a rideshare driver. It’s always best to discuss your insurance options with an insurance professional.
Using an Uber tax calculator like Hurdlr can help you keep track of your rideshare profits and estimate how much you’ll need to pay when April 15th rolls around. Using this kind of Uber calculator could prevent you from overpaying.
- Use the slider on the top graph line to select the amount of hours per week you plan on driving, say 40.
- Use the slider on the bottom graph line to select the number of rides per hour you normally do, say 4.
- Now choose your state from the drop down menu. We’ll choose California for this example.
According to the calculator, you’ll make $83,200 in a year. You’ll pay $19,033 in taxes. Your take home pay is $53,767. A calculator like this can help make sure you don’t overpay your taxes when the time comes.
How to avoid traffic tickets
Nothing will eat up your Uber or Lyft profits like getting a ticket for a traffic violation. Plus, tickets increase your insurance fees. Drive safely and obey all traffic laws to avoid unnecessary financial penalties.
- Speeding: Don’t. Neither you or your passenger should ever feel rushed or anxious
- Texting and Navigating: Laws banning hand-held cell phone while use while driving exist for a reason…to save lives. Consider an Uber or Lyft cell phone mount that attaches to your dashboard. In some states, it’s illegal not to have one if you’re a rideshare driver. There are loads of varieties. The best car dashboard phone holder is the one that works best for you. They put your phone within easy reach for a quick glance or to tap a button in your rideshare app without taking your eyes off the road for too long.
- Don’t drive in the carpool lane unless you have a passenger. That’s a big ticket item.
- If you’re an Uber Eats driver, pay attention to parking signs and parking meters if you have to leave your car to find a customer.
Handling Your Traffic Ticket
Ok, let’s say you do get a traffic ticket while driving for Uber or Lyft. That could be hundred of dollars out of your pocket and penalty points on your insurance, meaning an increased rate. Getting too many tickets could result in the suspension of your driver’s license. Most rideshare companies will suspend your account if you have three or more violations in a year, so drive carefully and obey all traffic laws.
- Can you make traffic ticket payments online? Check your state’s traffic ticket paying options to make sure online payment is accepted. If so, it’s a lot faster than sending a check through snail mail, and there’s no chance of your check getting lost in the mail. That could result in your driving privileges being suspended due to the delay in payment.
- Will Uber pay my traffic ticket? Nope. All rideshare drivers must abide by relevant state, federal and local traffic and parking laws. They must follow the rules of the road at all times. If there are regulatory laws for rideshare or for-hire drivers in your area, these laws have to be followed to the letter. If you break one of those traffic laws while driving for Uber etc., it’s your responsibility to pay the fine and take the steps to remove the violation from your record.
Bottom line? Pay your fines promptly if you get a ticket. Enroll in traffic school ASAP. Uber and other rideshare companies perform periodic background checks at random times, and you don’t want them to find an unpaid traffic citation on your record. If they no longer accept you as a driver, you lose out on a steady stream of income.
Can my Uber partner account be deactivated?
Yes, you could open the Uber app and find your account disabled for various infractions that break Uber’s code of conduct for drivers. Here’s the basic rundown:
- Uber may permanently deactivate your account for engaging in serious illegal activity while using the Uber app; not maintaining valid vehicle registration or driver’s license; and receiving serious traffic citations, or several traffic citations that indicate unsafe driving, while using the Uber app.
This is serious stuff. If Uber cancels your account as a driver, it could be very difficult or impossible to be reinstated. Do everything you can to provide a respectful, safe environment for your passengers at all time. You don’t want to lose the ability to earn your Uber driver weekly income. A few more tips to ensure a high driver rating:
- Avoid physical contact with customers.
- Do not make disrespectful comments of any kind.
- Drive safely, within speed limits, at all time.
- Never, repeat, never, ever contact a customer for personal reasons by calling or texting them after the trip is over.
- Keep your documents like DMV tags, and insurance and registration cards up to date.
Buying an electronic express pass makes paying a toll road fee while your driving a passenger much quicker and easier than stopping and fumbling for money or change. Even though your vehicle will be charged a toll, the amount is added to your fare as a reimbursement and charged to your passenger. This will only happen when your passenger is in your car, not when you’re heading to pick up them up or after you’ve dropped them off. If you don’t want to a toll charge to eat into your profits, avoid them when you don’t have a passenger in your car.
There is a lot of confusion for passengers and delivery customers when it comes to questions like “Are you supposed to tip an Uber driver?” Of course, it’s always appreciated when a passenger tips their driver, whether in cash or through the Uber or Lyft app. However, tipping is not a requirement of customers. It’s totally up to them. If you practice good Uber etiquette and go out of your way to help your customer feel comfortable, safe, and relaxed, they might be more likely to tip you. Drivers do keep 100% of their tips. Talk about an easy way to keep your profits!
Tax deduction tips as an Uber or Lyft Driver:
What is tax deductible for Uber drivers? Are there money saving Lyft tax deductions you can declare? There sure are, especially since you’re an independent contractor and not an actual employee of the rideshare company you’re driving for. Here’s some important information about paying self-employment Uber driver taxes as well as how to declare tax deductions as an Uber or Lyft driver:
- Keep your receipts and monthly statements for insurance, all types of vehicle maintenance, gas, license and registration fees, car cleaning, and car payments, if any.
- If you have a cell phone that you ONLY use for rideshare driving or delivery, the phone itself, any business accessories you buy for the phone, and the mobile plan are all deductible. If you use your personal phone for rideshare work, only a portion of your plan is deductible. However, you can still write off car chargers, phone mounts, or bluetooth headphones you use while driving on the job.
- You can write off supplies like the gum, water, snacks, tissues, and hand sanitizer that you purchase in order to offer them to your passengers.
- Have to pay for parking when picking up or dropping off a passenger? Keep the receipt and write it off. This also applies to tolls.
- Did you take out a AAA membership specifically to cover your rideshare work? The yearly fee is completely deductible.
How to file your Uber and Lyft taxes on Turbotax
- If you made over $20,000, Uber will generate an Uber tax form (1099-K) for you. It will detail your tax year earnings. Add the amount to the 1040 form so you can pay taxes on your rideshare business income.
- You’ll report your rideshare business income on a Schedule C form, which you’ll file along with your 1040 form.
- TurboTax Self-Employed can help you file your personal and business income and expenses when you’re an independent contractor for Uber.
- Lyft will generate a 1099-K form if you made more than 200 transactions and earned more that $600 in ride receipts during the year.
- Your Lyft Driver Dashboard will tell you exactly how much you earned from driving and non-driving income while on the job. All income must be reported.
- You’ll report your Lyft income on line 1 of your Schedule C IRS form
- TurboTax Self-Employed can help you file your personal and business income and expenses when you’re an independent contractor for Uber.
Protection from accident claims with Uber and Lyft:
You’re on the job and you get into an accident while driving for Uber. What exactly is the policy if you get into an Uber accident? More importantly, are Uber and Lyft liable in an accident? Possibly. Since drivers are independent contractors, they don’t actually work for Uber or Lyft, so the rideshare company giants are likely to squarely place blame on the driver for not driving safely, and let the driver’s personal insurance handle any claims. However, prosecutors for accident victims like to blame Uber or Lyft if the driver is logged onto the company’s app if an accident occurs while waiting for a ride request, or actively giving a ride to a passenger. Both Lyft and Uber provide limited coverage for drivers when they’re on the job.
Sometimes accidents are unavoidable and not your fault. But to protect yourself and your Uber profits:
- Keep your personal insurance up to date.
- Don’t be distracted by the rideshare app while driving. Pull over if you have to start swiping or tapping.
- If you get into an accident, pull over to a safe place and call 911.
- Take as many pictures as you can of damage and your surroundings.
- Get names and contact info of witnesses.
- Call your insurance agent or attorney if you have one.
- Drive safely, whether you have a passenger in the car or not. The best way to not lose any Uber profits due to being in an accident is to try and avoid one as much as possible.
We hope this article has helped to give you ideas on how to keep as much of your rideshare income as possible. Drive safely and profitably!