Ridesharing has become increasingly popular in recent years. According to to the Pew Research Center, roughly one in three Americans have used a ridesharing service — a number that’s expected to increase in the following years. If you’re thinking about becoming a rideshare driver, though, you’ll need to take advantage of all available tax deductions. Like with all businesses, you can deduct the cost of certain expenses from your income taxes.
Not surprisingly, you can deduct the cost of mileage from your income taxes. The Internal Revenue Service (IRS) supports two different methods for calculating mileage deductions: standard or actual car expense. Standard mileage involves multiplying the number of miles you drove in the given year by the IRS’s standard rate for that year. In comparison, the actual car expenses method involves keeping track of all-driving related expenses, such as insurance, gas, maintenance, repairs and even automotive depreciation.
You can also deduct the cost of a smartphone from your income taxes, assuming you use your smartphone for ridesharing purposes. Whether you drive for Uber, Lyft or any other ride-sharing service, you’ll probably use your smartphone to find customers to pick up. You may even be required to call or text these customers prior to picking them up. Regardless, the IRS allows ride-sharing drivers to deduct the cost of their smartphone from their income taxes.
If you recently purchased a dash cam to use in your vehicle, you can deduct it from your income taxes as well. It’s not uncommon for ride-sharing drivers to install a dash cam in their vehicles. With a dash cam present, ride-sharing drivers can rest assured knowing that their trips are recorded. At the same time, many insurance companies offer premium discounts for ride-sharing drivers who install a dash cam in their vehicle.
Do you offer free bottled water, mints, gum, snacks or items to passengers? If so, you should keep track of the receipts for tax purposes. Any complementary items such as these can be deducted from your income taxes. And while you probably won’t spend hundreds or thousands of dollars on complementary items, claiming this deduction can still lower your tax liabilities as a ride-sharing driver.
Accounting Software or Services
You can deduct the cost of accounting software or services from your income taxes. Whether you use Quickbooks Online, Quickbooks Desktop or any other type of accounting software or service, you claim it as a deduction.
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