Driving For Uber – The Tax Consequences

John Stancil

You have decided to take the plunge and become a driver for Uber, Lyft or some other rideshare program. Congratulations! You are now a small business owner and your tax return just got more complicated. The income you earn from Uber is taxable and must be reported on Schedule C of your 1040. However, you may deduct expenses incurred in earning this income.

In January, you should receive a Form 1099-MISC from Uber or whatever company you drive for. The amount should be reported on Schedule C as income. Tips received from customers not included on the 1099 should also be reported.

The most important thing to realize at this point is that you must keep good records of your mileage and expenses. As far as the IRS is concerned, if you don’t have a receipt or can’t prove it, it didn’t happen.  In deducting vehicle costs, you have two choices – you may take the standard mileage rate or you may take actual expenses.  For 2016, that rate is 56 cents per mile. This rate includes gas, maintenance, depreciation, and other costs of operating the vehicle. Alternatively, you may choose to deduct actual costs of operating the vehicle. This involves keeping track of all your vehicle expenses – gas, maintenance, depreciation and the like. You must also maintain a mileage log and can only deduct the percentage of costs that were related to the business. For example, if the costs of operating your vehicle was $10,000 and you drove it 15,000 miles during the year, but only 5,000 was for business, you may deduct one-third of the cost of operating the vehicle, or $3,333. Mileage to pick up the passenger and return home are deductible in addition to the miles incurred with a passenger in the vehicle.

Some vehicle costs may be deducted regardless of which method you utilize. A portion of the interest on the car loan, or a portion of the lease payment if it is a leased vehicle are deductible. Parking and toll fees incurred in the business may also be deducted. Since the vehicle must be clean for your passengers, you may also deduct the cost of car washes.

Other expenses that may be deducted include snacks or drinks provided to your passengers, extra insurance that you purchase on the vehicle, credit card transaction fees, and the portion of your cell phone bill that is utilized for business purposes. If you have a portion of your home that is used regularly and exclusively for a home office for the business, you may be able to take a home office deduction. This would be utilized for recordkeeping and other administrative tasks related to your business. The IRS has a simplified “safe-harbor” deduction of $5 per square foot (limited to 300 square feet) with no recordkeeping of expenses required. Any promotional expenses such as business cards may also be deducted. Office supplies used in the business may also serve as deductible items.

Once all the income and expenses are included on Schedule C, the bottom line is your taxable income. And this amount should be transferred to page one of your 1040. But you’re not finished yet. Since you are now considered self-employed, you must complete Schedule SE to pay self-employment (SE) tax of 15.3 percent. This is the equivalent of social security and Medicare taxes that are paid by and on behalf of an employee. Even though the stated rate is 15.3 percent, the effective rate is slightly less at 14.13 percent as you multiply the profit by .9235 before determining the tax. Additionally, one-half of the SE tax may be taken as a deduction to adjusted gross income on page one of the 1040.

Since there is no withholding from your income you may have to make estimated payments during the year. These are handled by sending a payment to the IRS on the 15th of April, June, September, and January along with a Form 1040-ES. Failure to do so may result in interest and penalties for underpayment of tax.

In summary, there are three important things to remember for tax purposes:

1.Report all your income.

2.Keep good records so you can deduct all your expenses.

3.File your taxes properly and on time.

Happy Driving!


Dr. John Stancil (My Bald CPA) is Professor Emeritus of Accounting and Tax at Florida Southern College in Lakeland, FL. He is a CPA, CMA, and CFM and passed all exams on the first attempt. He holds a DBA from the University of Memphis and the MBA from the University of Georgia. He has maintained a CPA practice since 1979 with an emphasis in taxation. His areas of expertise include church and clergy tax issues and the foreign earned income credit. He prepares all types of returns, individual and business.

Dr. Stancil has written for the Polk County Business Journal and has presented a number of papers at academic conferences. He wrote the Instructor’s Manual for the 13th edition of Horngren’s Cost Accounting. He is published in the Global Sustainability as a Business Imperative, Green Issues and Debates, The Encyclopedia of Business in Today’s World, The Palmetto Business Review, The CPA Journal, and in the NATP TaxPro Journal. His paper, “Building Sustainability into the Tax Code” was recognized as the outstanding accounting paper at the annual meeting of the South East InfORMS. He wrote a book entitled “Tax Issues Faced by U. S. Missionary Personnel Abroad ” that will soon be published.

He has recently launched a new endeavor, Church Tax Solutions, which presents online, on demand seminars on various church and clergy tax issues.

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8 comments on “Driving For Uber – The Tax Consequences

  • Additional surprises for Uber, Lyft drivers and the like include being considered to be “doing business” within a City for Business license/tax registration purposes. It is reported that San Francisco is already going after those; other cities may follow suit.

  • There is only one NO: the couriers, truck drivers and the taxi drivers are not allowed to claim per diem mileage rates for the mileage they drove for hire. They can deduct only the actual business related expenses. So keeping records is a ++

    • John L Stancil

      That is not correct. The standard mileage rate CAN be used for cars for hire. Publication 17, page 182 “You can elect to use the standard
      mileage rate if you used a car for hire (such as a taxi).

  • John,
    “Some vehicle costs may be deducted regardless of which method you utilize. A portion of the interest on the car loan, or a portion of the lease payment if it is a leased vehicle are deductible.” I am told by my CPA that if take the standard mileage rate for my business, it includes the interest charge on the vehicle and I can not take any portion of it on my Schedule C. Please give me a definitive answer on this.

    • John L Stancil

      If it is a leased vehicle, the lease cost is included in the standard mileage rate, just as depreciation is included in the rate for an owned vehicle. In addition, when you use the standard mileage rate, the business percentage of interest expense for a self-employed individual, (but not for an employee), personal property taxes, and parking fees and tolls are deductible.

  • The rate is 56 cents. I would anticipate it to be lower either later this year or for 2017, with the decline in gas prices.

  • John L Stancil

    54 cents for 2016. Don’t know where my brain went there. Apologize for the confusion. Still expect it to go down.

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