Vehicle-Related Expenses: The Core of Your Deductions
As a Lyft driver, your vehicle is your primary business asset. Understanding how to maximize your car-related deductions can significantly reduce your taxable income. You have two options for deducting vehicle expenses:
Standard Mileage Rate: For 2023, you can deduct $0.655 per mile driven for business purposes. This method is simpler and covers gas, maintenance, and depreciation.
Actual Expense Method: This involves tracking all your vehicle-related costs, including:
Fuel
Oil changes
Repairs and maintenance
Insurance
Vehicle registration fees
Lease payments
Depreciation
Regardless of which method you choose, you can also deduct parking fees and tolls related to your Lyft driving.
Lyft Platform Fees and Commissions
Don’t forget to deduct the fees and commissions Lyft charges you. These are direct business expenses that reduce your taxable income. Make sure to review your annual summary or 1099 forms to accurately report these deductions.
Technology and Communication Expenses
As a rideshare driver, your smartphone and data plan are essential tools. You can deduct:
A portion of your cell phone bill based on business usage
Cost of a dedicated phone for Lyft driving
Phone mounts and chargers
Navigation system or GPS device
Passenger Amenities
Providing a great experience for your passengers can lead to better ratings and tips, but it can also provide tax benefits. You can deduct:
Water bottles and snacks for passengers
Hand sanitizer and tissues
Auxiliary cables for music
USB chargers for passenger use
Personal Protective Equipment (PPE)
In the wake of the COVID-19 pandemic, PPE has become a necessary expense for many drivers. You can deduct:
Face masks
Hand sanitizer
Disinfectant wipes
Protective barriers or shields installed in your vehicle
Business Insurance and Licenses
Any additional insurance or licenses required for rideshare driving are deductible, including:
Rideshare endorsement on your auto insurance
Commercial auto insurance
Business licenses or permits required by your city or state
Professional Development
Investing in your skills as a driver can be tax-deductible. Consider deducting:
Rideshare driving courses or workshops
Defensive driving classes
Local area knowledge improvement courses
Home Office Expenses
If you use a portion of your home exclusively for managing your Lyft business, you may be eligible to deduct a percentage of your:
Rent or mortgage interest
Utilities
Property taxes
Home insurance
Health Insurance Premiums
As a self-employed individual, you may be able to deduct your health insurance premiums if you’re not eligible for coverage through an employer or spouse’s plan.
Tracking and Maximizing Your Deductions
To make the most of these deductions:
Keep detailed records of all expenses
Use a mileage tracking app to log your business miles
Save all receipts related to your Lyft driving
Consider using accounting software designed for self-employed individuals
Consult with a tax professional to ensure you’re claiming all eligible deductions