Ridesharing has become a popular way to make some extra money, but before you commit to driving for a ride-share company like Uber, Lift or Sidecar, you need to know the tax implications of this type of work!
- Generally, you’re treated as an independent contractor, not as an employee, which means you’ll receive a Form 1099-MISC, not a Form W-2. The income you earn will be subject to self-employment tax and reported on Sch. C of your income return. Since there’ll be no withholdings from your pay, you’re responsible for making estimated tax payments associated with this income. Remember, the income will also be taxable in your state, so be sure to consider your state tax implications.
- There are various deductions allowed to offset your income. One example is use of your personal vehicle for business purposes. You can take the standard deduction for miles driven or deduct actual expenses. Be sure to track your mileage and document your expenditures. Other common deductions include tolls and parking fees, as well as snacks and water for your passengers. Any out-of-pocket expenses to use an “Uber device” will also qualify as a deduction. You may be able to write off the business use of your cell phone or navigation device.
If you’re thinking of engaging in this type of activity, contact us to discuss how it’ll impact your tax situation