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Tax Deductions for Uber Drivers: Maximize Your Savings

By Alison K Plaut

Published on 2 Feb 2024 5 min read

If you’re an Uber driver, it might be the first time you’re no longer a W-2 employee. Instead, you’re an independent contractor free to set your own hours and adapt work to your lifestyle. While this freedom is convenient, it also means that Uber doesn’t consider you an employee, and, as such, you’re responsible for reporting all income and expenses directly to the IRS. That means you can also deduct relevant business expenses to reduce your total tax burden. 

Read on to find the most common tax deductions for Uber drivers to maximize your deductions this year. 

Understanding Your Uber 1099-K

As an Uber driver, you’re an independent contractor providing a service, not an employee. You’ll have to pay self-employment taxes like any other freelancer. That’s also why Uber won’t withhold taxes from your payments or issue a W-2. Instead, the company reports your income on IRS 1099 forms. You might receive two 1099s from Uber: 1099-K or 1099-NEC.

For Uber drivers, 1099-K is more important. It reports the total income all your passengers paid for rides. It includes all money collected from passengers, including Uber’s fees and commissions. You can deduct the Uber fees and commissions as business expenses, so you pay taxes on what you earn after paying Uber’s fees. 

If you received other income from Uber, such as a referral bonus or non-driving-related bonus, you may also receive form 1099-NEC.

One new change is regarding reporting thresholds specifically for a 1099-K. The IRS plans to implement a new $600 reporting threshold for goods and service transactions from third-party processors like Paypal and Venmo. However, that implementation was delayed. 

For the 2023 tax year, the 1099-K reporting threshold is still over $20,000 or more than 200 transactions, but look out for changes in 2024. However, credit card transactions have no minimum threshold.

Whether you receive a 1099-K or not, you’re expected to report all income to the IRS, so you’ll need to report all ridesharing income.  

Tax Deductions for Uber Drivers

If you’re ready to maximize deductions from your Uber income this year, consider deductions for mileage, cell phone expenses, and other allowed business expenses. 

Mileage

As an Uber driver, your largest expense will likely be the costs related to your car used for work. You can deduct the actual operating expenses for the vehicle you use while using it for Uber. That means you must track gas, repairs, oil, insurance, car registration, repairs, maintenance, depreciation or lease payments, and other mileage costs. 

However, taking the IRS standard deduction usually results in a higher deduction. You’ll still need to track mileage, but you can deduct a flat rate of 65.5 cents per mile for 2023 and 67 cents per mile in 2024. 

You will receive an Uber tax summary that includes all the miles you drove waiting for a trip, while going to pick up a rider, and on a trip. However, it’s essential to keep careful records of all off-trip mileage.

If you use the standard deduction, suppose you drove 15,000 miles for Uber or other rideshare services in 2023. With the standard deduction, your expenses would be 15,000 * 0.655 = $9,825.

However, if you use the same vehicle for your business and personal use, you must keep accurate records of the separate uses. You may only deduct the expenses related to business use. 

For example, if you drove 15,000 for Uber and another 10,000 for personal use in 2023, you can only deduct the expense for the 15,000 miles driven for business. You must support all business expense claims with mileage logs, receipts, or other documentation. 

Cell Phone Expenses

If you use a cellphone exclusively for your Uber business, you may deduct all phone expenses. If you have one phone that is used for both business and personal use, as the cellphone is essential for the business, the expenses related to business use are usually considered deductible expenses. 

However, you can only deduct that portion of your smartphone expenses that is related to your business use. You may be able to deduct:

• The cost of the phone
• Carrier charges
• Essential business accessories like mounts, chargers, cradle, or backup battery

As it’s difficult to prove the percentage of phone usage was exclusively for business, many Uber drivers have a phone solely for business use. 

Other Expenses

In addition to the vehicle costs and cellphone costs, nearly any other business expense can qualify as a tax-deductible expense. Here is an overview of some possible deductions:

• Roadside assistance: For a business vehicle.
• Business licenses: Including any registrations required in your area for the business. 
• Tolls and fees: All fees and tolls that you incur while driving can be deducted from business income, including city and airport fees, as well as freeway, highway, and bridge tolls. 
• Emergency car repair: You may deduct a tire inflator and pressure gauge, as well as any other basic vehicle maintenance kits, like a car tool kit, flashlights, flares, or a portable battery jump pack purchased for business use.  
• Passenger emergency safety: A first aid kit and other emergency safety items, such as snacks purchased for your business clients.
• Extra services for clients: Purchasing bottled water, snacks, facemasks, hand sanitizer, or other amenities for customers can be a tax-deductible business expense.
• Car upgrades: Floor mats, professional cleaning or detailing, and other expenses related to your business to improve the customer experience can be tax deductible. 
• Office supplies: This can include a computer or software required to manage and track your business expenses. However, if these are also used for personal use you may not be able to deduct them. Speak with a CPA to understand whether the deduction is allowed. 

How to Prepare to File Taxes and Track Tax Deductions as an Uber Driver?

To prepare and file taxes and track deductions as an Uber driver, consider these tips:

• Track everything: This can be cumbersome without tracking software or apps to help you. While Uber can report driving-related mileage for deductions, you should keep receipts and file them carefully for all other business expenses. 
• Create digital files: To save time preparing taxes, ask for electronic receipts for all expenses or scan physical receipts and save them into a single folder or cloud-based drive so you don’t have to search later. 
• Start early: Tax season actually starts on January 1 of the previous year. By setting up clear accounting systems or using trusted accounting software like doola Books, you’ll save time and headaches when preparing deductions.  
• Consider getting help: As a busy professional, getting a certified public accountant or tax professional to help you prepare taxes or double-check accounts can save time and be more than worth the costs.

How to Claim Deductions on Your Taxes as an Uber Driver?

You will usually report your 1099 income on Schedule C to claim tax deductions as an Uber driver. After subtracting business expenses from income, you will input the difference on Schedule 1 of Form 1040. If you use tax preparation software, these forms will be filled out automatically as you input your relevant income and expenses. 

Final Tips on Tax Deductions for Uber Drivers

Uber can be a great side hustle or full-time career. But, tax preparation can be overwhelming. As an Uber driver, you’ve got some extra help. Uber will give you a tax summary with the total amount passengers paid and Uber fees, tolls, and split fees to help you with deductions. You’ll also have a record of total online mileage with Uber. 

Whether you have an Uber LLC or work as an independent contractor, preparing and correctly filing taxes with allowed deductions still takes time that you could use for driving or with family. That’s why excellent tax preparation software can be so valuable. Consider doola Books to simplify bookkeeping and free up time to focus on your business or other goals. Or, get doola’s tax package to ensure compliance and online filings for worry-free tax filings! 

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