Uber Tax Deductions FAQ
How do I classify each deduction?
Most of your business expenses as a rideshare driver can be deducted as either a “Supply” or as an “Other Expense.” You can view how all of Stride’s business expense categories match-up on the Schedule C [here].
How do I record a depreciating asset?
If you’re filing your taxes with a tax filing software, you’ll need to report that you have a “depreciating asset” for your business. You can usually find this option in the “Business expenses” section of any filing software.
If you’re filing taxes by hand, you’ll need to fill out Form 4562 - Depreciation and Amortization.
You’ll report your business assets, like work-only cell phones or dashcams, and then either
- Depreciate the cost of the asset over its useful life (which means you can deduct a portion of the asset’s costs each year), or
- Take what’s called the Section 179 deduction, which allows you to deduct the entire cost of the asset this year, as long as the asset is used for work over 50% of the time. For example, if you bought a new phone to use for your UBer work but only use it for work 25% of the time, the cost of the phone wouldn’t be eligible for the 179 deduction.
The depreciation (or deduction) method that you choose depends on what would be most helpful for your business this year: would you rather be able to deduct the entire cost of the asset this year, or be able to deduct a portion of it for multiple years (and plan ahead for income taxes in future years)?
What kind of documentation do I need for my deductions?
While you won’t submit your expense documentation with your tax return, you will need it to 1) know how much you can deduct from your business income, and 2) to back up those deductions during an audit.
A good way to think about claiming tax deductions is that the more documentation, the better. The documentation you keep should provide the full context of your purchases to the IRS, should you ever be audited. The details that the IRS would want to know include:
- Time and date of the expense
- Description and business purpose of the expense
- Name of the vendor
- Amount of the expense
Ideally, you'd keep receipts (or pictures of receipts) from each of your business purchases, and keep detailed notes on how you use each item that you buy. However, with good cause the IRS may accommodate particular circumstances that hindered your ability to preserve adequate records.
It’s recommended that you keep your documentation for at least three years after the end of the tax year. Once you've filed your returns, the IRS has up to three years to review your tax returns and assess any additional taxes owed. However, it can take up to six years to make a tax assessment if they determine that you omitted a substantial amount of income from your return.
What if I didn’t keep my receipts for business expenses?
While keeping receipts throughout the year is definitely the best way to backup your expenses during an audit, there are other ways to document your business expenses.
One way to document your business expenses from the year would be to go through your bank statements, find your business purchases, and then take good notes on what was purchased, what it was used for (as well as notes on if and how the purchase was also used for personal reasons).
You should also definitely save your receipts going forward; your goal should be for an auditor to have no reason to doubt that your business expenses are legitimate, and receipts are the best first step.
Are there business expenses that are deductible?
Yes! There are many business expenses that are considered “ordinary and necessary” for running a rideshare business. You can find a complete list of them here.
A few of them include:
- Water bottles that you buy for passengers
- A portion of your cell phone bill
- Car cleaning supplies
Just be sure to only deduct the portion of these expenses that are for your business, not for personal use. For example, if you use your cell phone for work 50% of the time, you would only deduct 50% of your phone costs.
What about mileage?
People who drive for work have the option of deducting the cost of their car expenses (such as gas, maintenance, car payments, and a few others), or deducting a standard amount for every business mile driven.
The standard mileage rate for 2016 was 54 cents per mile, while the 2017 rate is 53.5 cents per mile.
If you haven’t been tracking your business mileage--don’t panic! Uber tracks all of your on-trip mileage (when you have a passenger in the car) for you, so you’ll be able to deduct this amount at the very least. Here’s where you can read more about how to fill in the blanks on your mileage log.
What about Airport/City fees?
You won’t have to pay taxes on any fees or commissions from Uber. Airport fees, along with other commissions and fees from Uber, are included in the gross income that’s reported on your Uber 1099-K.
When you file your taxes, you’ll need to deduct these fees as a business expense. Tax filing softwares like TurboTax or Credit Karma Tax will have you enter these fees as “Commissions and fees.” If you’re filing taxes by hand, you’ll deduct them on Line 10 - Commissions and fees.