As freelance jobs become more and more popular, opting to work as a rideshare driver is a great self-employment alternative that many are choosing nowadays. The way we think about commuting has been forever altered thanks to the popularity of platforms like Uber and Lyft, with an increasing demand for rideshare services, which also opens more positions for drivers to take. However, rideshare drivers must be aware of the tax implications this self-employment option brings. Here are five useful tax tips that rideshare drivers should keep in mind when filing their income.
1.One of the most important steps every freelancer or self-employed worker should follow is to create a system to track their tax deductions. Whether we decide to use an expense-tracking spreadsheet or a mobile app, being consistent and documenting every single business relates expense is a must. This will help us record and identify every deductible expense we made during the year, and facilitate our income tax filing process.
2.Many freelancers and self-employed workers tend to struggle when keeping track of their personal expenses and business expenses. A great way to solve this issue is by having separate bank accounts, one for our personal expenses, and one to use exclusively for business expenses. This will not only help us manage our personal and commercial finances better but will help us keep track of our business expenses, too.
3.Something that many people tend to ignore for some reason is that there are plenty of apps available, both free and paid, that can help us when tracking expenses and deductions. Taking advantage of this reliable and effective tools to document the number of trips we have, how often we charge fuel, the time we’ve spent driving, and any car repair costs will make our filing process more accurate and easier than ever.
4.Now, as rideshare drivers, we should always remember that mileage tracking represents our biggest tax deduction. Therefore, we must be very careful and consistent when recording the miles we drive. Since the IRS requires a mileage log when filing such deduction, we shouldn’t take this lightly. Otherwise, we might not be eligible for this deduction, and this would have a significant impact on our income taxes without a doubt.
5.Lastly, rideshare drivers who work with apps like Uber and Lyft have access to a very resourceful tool, their driver dashboard. This is where drivers can find very useful information, including their annual income, some of the deductions they might be eligible for, as well as the commissions that the apps are taking out of they pay.