The Top Tax Deductions Available for Lyft Drivers(Updated for 2024)

As a Lyft driver, managing your finances effectively is crucial for maximizing earnings. Owning your own business as a rideshare driver means you're eligible for various business deductions, significantly impacting your taxable income. In this guide, we'll explore key tax deductions for Lyft drivers and how Everlance can help you optimize these deductions.

Here are some of the most utilized tax deductions for Lyft drivers:

Car Expenses

As a Lyft driver, your car is your most significant business asset. Understanding how to deduct car expenses can lead to substantial tax savings. There are two methods for deducting these expenses: the Standard Mileage Rate method and the Actual Expense method.

Standard Mileage Rate Method

1. Simplicity and Ease: This method involves multiplying the total business miles driven by the IRS standard mileage rate (For 2024, the mileage rate is 67 cents per mile, you can find how that's determined, as well as get information on historical rates in our blog post here: 2024 IRS Mileage Rate)
2. What's Covered: The rate is designed to cover a wide array of vehicle expenses, including gas, depreciation, insurance, and repairs, in a single per-mile rate.
3. Record-Keeping: You must keep a detailed log of your business miles. Everlance simplifies this by automatically tracking every mile you drive for Lyft.

Actual Expense Method:

1. Detailed Tracking: This method involves deducting the actual expenses of operating your vehicle for business purposes.
2. Eligible Expenses: These include gas, oil changes, repairs, insurance, vehicle registration fees, lease payments, depreciation, and more.
3. Proportionate Deduction: If you use your vehicle for both personal and business purposes, you can only deduct the business portion of these expenses. Accurate record-keeping is essential to calculate the percentage of business use accurately.

Expenses Deductible Regardless of Method

‍Regardless of which deduction method you choose, there are additional car-related expenses that Lyft drivers can typically deduct:

• Parking Fees and Tolls: Costs incurred for parking and tolls while driving for Lyft are deductible.
• Additional Business-Related Expenses: These can include car washes and detailing, specifically for maintaining your vehicle’s appearance for Lyft driving.

Understanding and accurately calculating your business mileage is crucial for Lyft drivers. The choice between the standard mileage rate and actual expense method can significantly impact your tax savings. The best method depends on your specific situation. The standard mileage rate offers simplicity, but the actual expense method may yield higher deductions if your car expenses are substantial.

Phone and Internet Expenses

In the digital age, your smartphone and internet connection are indispensable tools for managing your Lyft business. These expenses, when used for business purposes, are not just operational costs but potential tax deductions.

Smartphone Expenses

1. Essential for Business: As a Lyft driver, your smartphone is your primary tool for navigation, accepting rides, communicating with passengers, and managing your driving schedule.
2. What's Deductible: You can deduct a portion of your smartphone's cost, including the purchase price or monthly payments if it's financed.
3. Service Costs: Monthly service charges, including data plans, are partially deductible. The deductible portion is the percentage used for Lyft driving relative to your total phone use.
4. Business-Related Accessories: Items like phone chargers, mounts, or hands-free devices that are necessary for safe and efficient driving are deductible.

Internet Expenses

1. Online Connectivity: Access to the internet is crucial for real-time ride requests, route planning, and staying connected with Lyft’s platform.
2. Home Internet Use: If you use your home internet for business activities like tracking earnings, online training, or researching routes, a portion of your home internet bill is deductible.

Lyft Fees and Commissions

The fees and commissions Lyft charges are deductible. This includes costs associated with the platform use and transaction fees. Remember that if you receive a 1099 from Lyft, that is a report on your gross income, not your net income, and before any costs are removed, including transaction fees, commissions, platform fees, etc.

Supplies

Supplies like water bottles or snacks for passengers, essential for enhancing customer experience, are deductible as business expenses.

Software

Software or subscriptions you pay for to help with your business, such as a Spotify Premium or Everlance Premium subscription can be a tax deduction. Note: This also may include any software you use to file your business taxes, even as a self-employed individual.

Partial Usage: If you use any software for both personal and business purposes, you can deduct the portion attributable to your business use.

Health Insurance Premiums

If you are self-employed and pay for your own health insurance, you may be able to deduct your health insurance premiums.

Home Office Expenses

If you use a portion of your home exclusively for business purposes, you may be able to deduct a portion of your rent, mortgage interest, property taxes, utilities, and other home-related expenses.

Education and Training Expenses

If you take courses or attend training related to your Lyft business, you may be able to deduct those expenses as well.

Keeping these in line and logged correctly is incredibly important, and the reason we built Everlance. Everlance helps Lyft drivers automatically track their business miles, business expenses, remain IRS complant, and even will help you discover some deductions you may have missed. Lyft drivers save 10% on their first year of Everlance Premium through the link here

It's important to note that tax laws and regulations change frequently, so it's always a good idea to consult a tax professional or use tax preparation software to ensure that you are maximizing your tax deductions while staying compliant with the latest regulations.