The sharing community has become an industry all its own. With the introduction of companies such as Uber, Lyft, AirBnB, Turo and many others, Americans can rent and share almost all the conveniences modern life.
Uber is a car transportation and food delivery mobile app company started in 2009 by Travis Kalanick and Garrett Camp. Uber operates in 570 cities worldwide and growing. Their main purpose is competition with local taxi cab companies. Users can access the Uber mobile app to call an Uber driver to pick them up and bring them to their destination. Most Uber drivers own their own cars and work their own hours without oversight from Uber Corporate. Drivers can work as little as a couple hours a week to as many hours as they are comfortable with. Fair prices are based and fluctuation due to market demand at certain times of the day and year (prices can increase during rush hour and on holidays). Users pay the driver via the mobile app and Uber takes a modest percentage of that fair as a commission.
With the increased popularity of driving with Uber more and more people are using it to bring in a little side income.
Here is a quick pocket (glove box) guide to ensure you understand what you need to keep and use to file your tax return at the end of the year.
As an Uber driver, you will receive a 1099-K which will show the gross income for the year. The gross income is the base fare, per minute/per miles, it is also the minimum fare and cancellation fees before commissions and fees. The gross income includes the tolls paid by the passenger even though this is reimbursed by Uber. Finally, this also includes the extra $.25 fee when sharing a ride with another person. The 1099-K is the most important piece of information the accountant needs to start preparing your tax return. A lot of drivers will look at their 1099-k and tell their accountant that they didn’t receive this much money. Again, this is the gross amount which hasn’t taken into account fees and commissions.
The next piece of information that is of great importance is your Uber dashboard login information. Once logged in, you can pull all of the commissions and fees that Uber has charged, throughout the year, to bring your gross income down closer to what you actually received as a driver.Let’s talk about the other expenses that you, as a driver, can deduct on your tax return. You should have this information with
Let’s talk about the other expenses that you, as a driver, can deduct on your tax return. You should have this information with as much backup documentation you can when you prepare your income tax return. As a driver you are not an Uber employee, you are an independent contractor which means you can deduct more expenses than if you were an employee. Below are some expenses (broken down by category that you can deduct. This is obviously not a complete list so this is when you and your accountant can get creative.
Expenses to make your passengers comfortable:
- Music apps for your passengers (Spotify, iTunes, and Pandora)
- Floor Mats
- Snacks for your passengers
- Emergency tools and first aid kits
- Technology such as hot spot services, mobile routers, dash cam etc.
- Tourist baskets (which include water, Charlie cards, snacks, etc.)
- Car Cell Phone Mount
- iPhone rental fee
- Toll Transponder
- Repair Kits
- Jumper Cables
- Battery Charger
- AAA Membership
- Auto Insurance add-ons & Liability insurance
- Car inspection & Registration
- Car Washes and DetailingAuto Repairs
- Gas & OilGarage Rents – if you store your car in a garage where you need to pay a rental fee
- Interest Payments
As an accountant the most common questions brought up are how the client is going to deduct mileage and their cell phone. When it comes to mileage an Uber driver can only deduct mileage to get to a passenger. If the driver gets a notification that a passenger is in one part of the city the mileage getting to that passenger is deductible. Once the passenger is in the car, the mileage to the passenger’s destination is also deductible.
*Pro-Tip!* Mile-IQ, TripLog and Expensify are all apps to that will log the mileage you have driven. Download one of these and use it to prepare your tax return.
As mentioned, cell phones are another hot topic for what is deductible and what isn’t. Data used to run the Uber app, pick up passengers and used during and for Uber is deductible. Data used not during working hours and not for work related calls is not deductible.
*Pro-Tip!* To make your life easier find a percentage of your day that you use your phone for Uber. Multiply that percentage by your monthly bill. Side note – if you rent an iPhone from Uber, that fee is deductible.
As an Uber driver, remember, you are a subcontractor. This means your accountant will fill out a Schedule-C for you to report all income and expenses. As a Schedule-C, you are a sole proprietor which means you’ll have to pay self-employment taxes on your income. Self-employment taxes are Social Security, Medicare, and Federal Withholdings. However, as a sole proprietor, you will also receive a deduction for half of the taxes on the front of your 1040. You can deduct self-employed health insurance and contributions to your SEP-IRA. You should discuss this further with your accountant upon starting your venture as an Uber Driver.
Dan Norcott, EA
Dan Norcott is an Enrolled Agent and specializes in small business and individual income tax return preparation. Contact us if you need any additional information regarding the “sharing economy” or small business taxes or accounting.