Uber and Lyft drivers are independent contractors who operate as sole proprietors for tax purposes. This tax status means that a driver incurs self-employment tax and pays Social Security and Medicare taxes typically paid by employers. Drivers should keep track of all expenses incurred while driving for Uber and Lyft to reduce their tax burdens.
All of the costs of maintaining and insuring your vehicle for Uber or Lyft use are deductible on your tax return. These costs include fuel, oil changes, auto insurance, and parts used for repairs. You can claim the IRS mileage deduction to account for wear and tear from your Uber and Lyft trips. The costs of parking, tolls, and basic amenities for passengers are also deductible as long as they can be tied to your work. It is important to maintain receipts and other proof of expenses to support these deductions. The IRS also expects deductions to be related to expenses solely accrued from business uses of personal vehicles.