If you're a gig worker wondering about deductible expenses as a delivery or rideshare driver, understanding these can maximize your take-home pay and ensure compliance with tax regulations.
Navigating allowable expenses may seem daunting, but it's crucial to not leave money on the table. As a gig worker, you must track business expenses throughout the year. The IRS allows deductions for many of these expenses, significantly reducing taxable income.
This guide explores key expenses that delivery and rideshare drivers can typically claim on their taxes to minimize tax liability.
1. Mileage and Vehicle Expenses
One significant deduction available is related to vehicle expenses. You have two options: Standard Mileage Rate or Actual Expenses. The standard mileage rate for 2024 is 67 cents per mile, covering gas, maintenance, depreciation, and insurance. Alternatively, you can deduct actual costs like gas, oil changes, tires, insurance, registration, repairs, and depreciation. Accurate records of mileage and receipts are essential regardless of the method chosen.
2. Mobile Phone and Data Plan
You can deduct a portion of your phone bill and data plan related to business use. For example, if used 80% for work and 20% for personal use, you can deduct 80% of phone expenses. If a separate device is used solely for work, you can deduct 100% of its cost and monthly data plan.
3. Tolls and Parking
Tolls or parking fees incurred while driving for work are fully deductible. However, parking tickets and traffic fines are not deductible.
4. Insurance
Car insurance is deductible if using the actual expense method but not with the standard mileage method since it’s included in that rate. Health insurance premiums are also deductible if you're not eligible through a spouse's employer or traditional employer.
5. Car Loan Interest
The portion of car loan interest corresponding to business use is deductible even with the standard mileage method.
6. Work-Related Education and Training
Courses or training specifically related to improving your driving business are deductible.
7. Tax Preparation Fees
Hiring a tax professional or purchasing tax software is deductible due to the complexity of independent contractor taxes.
8. Business Licenses and Fees
Licenses or background checks required by platforms like Uber or DoorDash are considered essential business operations expenses and are therefore deductible.
9. Subscription Costs
Subscriptions necessary for driving work such as apps that help find work or track expenses are deductible.
10. Phone or Delivery Accessories
Accessories like car chargers, cables, phone holders, insulated food bags (for delivery drivers), electric vehicle chargers, first-aid kits, car floor mats, drink holders or car seat covers used professionally are all tax-deductible if deemed “ordinary and necessary” for your business.
Frequently Asked Questions About Claiming Expenses as a 1099 Driver:
- Keep all receipts related to any business expenses.
- Use apps like Solo to track mileage automatically.
- Store digital copies of receipts.
- Separate business from personal finances where possible.
By familiarizing yourself with claimable expenses as a delivery driver or rideshare driver, you can reduce taxable income effectively while consulting with a tax professional ensures maximized deductions available to you.