If you are a self-employed driver, whether you drive a yellow cab, Uber, Via, or Lyft, you must report your income on Schedule C. You may receive Form 1099-MISC, Miscellaneous Income or Form 1099-K with the income paid to you that is to be reported on your Schedule C. Any income not reported on a 1099, must be included on your Schedule C also, this includes any cash fares and tips you receive while driving. You may deduct all associated expenses to your self-employment income on your Schedule C.
Tax deductions for drivers
If you are self-employed and your net earnings are $400 or more, you must pay self-employment tax on the income you report on Schedule C. In addition, you may need to make estimated payments to cover the amount of self-employment tax or income tax associated with the income you report on Schedule C.
You may be able to reduce your taxes by deducting unreimbursed, work-related expenses. If these expenses are attributable to being a statutory employee or self-employed, they may be deductible on Schedule C. You should keep receipts to substantiate these expenses.
Examples of some items you may be able to deduct include:
- Vehicle expenses (for example, parking fees and tolls; standard mileage rate if not deducting actual expenses; and actual expenses such as maintenance and repairs, fuel, oil, registration fees, insurance, tires, and depreciation if you own the vehicle)
- Travel Expenses, including lodging, meals (with limitations), and laundry expenses if incurred while traveling away from home
- Union and trade association dues
- State or local government licenses and regulatory fees
- Flat-rate occupational taxes and excise taxes (for example, heavy highway vehicle use tax)
- Liability insurance premiums
- Subscriptions to trade publications
- The cost and upkeep (for example, cleaning) of uniforms if they are required for work and not suitable for everyday wear (for example, the cost of safety shoes and gloves for a truck driver carrying blacktop) Note: If you wear a company uniform but are not required to wear it, you cannot deduct uniform expenses.
- Leasing costs (for example, a truck driver's trailer rental fees or a taxicab driver's rental fees paid to a cab company for the use of its vehicles)
- Items provided to your riders for their comfort (bottled water, snacks, etc.)
When determining vehicle expenses, you cannot use the standard mileage rate for vehicles used for hire such as a taxicab or a bus.
To deduct travel expenses, you must be traveling away from home, which means your duties require you to be away from the general area of your tax home longer than an ordinary workday, and you need to sleep or rest to meet the demands of your work while you are away from home. You cannot satisfy this rest requirement by merely napping in your vehicle or grabbing a quick bite to eat. Also, you do not have to be away for a whole day, or from dusk to dawn, as long as your break from work is long enough for you to get the necessary sleep or rest. Most local drivers do not have travel expenses. However, as a long-distance truck driver, you may deduct travel expenses if you can substantiate expenses. You need to keep receipts or maintain a log with such information as the amount, time, place, and business purpose of the travel expenses incurred. Maintaining a log book with cities, distance, and driving time or keeping track of the number of hours driven and the number and duration of the stops may not be enough to support a deduction for travel expenses.
You must determine the location of your tax home before you can determine whether you are traveling away from it.
- Generally, your tax home is your regular place of business. It does not matter where you live.
- Your tax home includes the entire city or general area in which your business or work is located.
- If you have more than one regular place of business, your tax home is your main place of business.
- If you do not have a regular or a main place of business because of the nature of your work, your tax home may be the place where you regularly live.
- If you do not have a regular place of business or post of duty and there is no place where you regularly live, you are considered a transient and your tax home is wherever you work.
For example, the tax home of a driver usually is where they begin and end a trip, even if they live somewhere else. A self-employed driver's tax home may be at the headquarters where the trucking assignments are given out, even if that is far from where they live.
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