Uber Tax Guide: How to File and What Deductions You Can Take

Uber drivers need to pay both income and self-employment taxes. These will be two of your biggest expenses; the amount you’ll owe every year will depend on how much you make, but many sources recommend budgeting around 15% of your earnings in anticipation of tax season.

That’s on top of your other overhead for this side hustle, which includes the cost of fuel and maintaining your vehicle. All told, this will take a big bite out of your earnings.

Because your expense ratio is relatively high as an Uber driver, it’s very important to take advantage of all of the tax deductions you’re eligible for. The more money you can avoid spending, the better.

By and large, you can deduct legitimate business expenses from your taxes. However, the IRS has rules on how you can do this and how much you can claim.

Vehicle expenses

You can deduct your vehicle expenses with one of two methods:

Option 1: Standard mileage deduction

With this method, you deduct only your mileage (i.e., how much you drove for Uber that year), meaning you don’t write off any other vehicle-related expenses.

People usually opt for this method when they don’t have any major repairs or other large expenses to make up for. It’s by far the simpler of the two deductions.

How this works: Each year, the IRS sets how much you’re allowed to deduct per mile you drive. For example, the 2023 standard mileage rate for self-employed individuals was 65.5 cents per mile, which works out to a $6,550 deduction for 10,000 miles. 1

To take this deduction, you need to track your mileage. You can do this with apps like MileIQ or TripLog, or do it the old-fashioned way by keeping an eye on your odometer and maintaining a logbook.

If you record your entries by hand, make sure that each runs from when you turn on your Uber app to when you close it, and don’t include any miles you drive when you aren’t on the clock. You’re only allowed to deduct business expenses, so your personal driving doesn’t qualify.

Option 2: Actual car expenses

With this method, you itemize every eligible vehicle-related expense you pay during the year, then claim those as deductions on your taxes.

This will result in a long list, and tracking these expenses is a lot more involved than taking a standard mileage deduction, but it can also save you more money, particularly if you had a lot of non-fuel expenses.

Deductible “actual car expenses” include:

• Fuel costs, i.e., gas.
• Repairs and maintenance, like tire replacement, oil changes, etc.
• Licensing and registration fees, like renewing your driver’s license or obtaining any special Uber-related licensing.
• Car insurance premiums, of which you can take a percentage that corresponds to how much you drove for Uber that year. In other words, if 30% of your driving time was spent on Uber or other commercial driving, you can deduct 30% of your premiums.
• Vehicle depreciation over time, i.e., how much your car drops in value due to age and everyday wear and tear. You can also deduct this in proportion to how much you used your car for business purposes. 2
• Lease payments and loan interest, if you haven’t paid your car off yet. Here again, these can be deducted in proportion to your business-related mileage.
• Car cleaning services and materials, like car washes and cleaning supplies.
• Roadside assistance plans, which provide aid in emergencies like vehicle breakdowns, flat tires, and other surprises that could interfere with your business.

General operational expenses

Operational expenses are all the costs associated with your business as an Uber driver, minus any vehicle-related expenses.

Here are some of the operating expenses you’ll likely face, all of which are deductible:

• Uber’s own service fees and commissions, which Uber automatically deducts from your earnings.
• Parking fees and tolls incurred while driving for Uber, unless you’re reimbursed for them (Uber sometimes does this with tolls incurred while a trip is in progress, but not tolls incurred in transit between trips).
• Car accessories and other supplies, including phone mounts, chargers, and the other equipment necessary for your work.
• Bike equipment and repairs, if you deliver for Uber Eats via bike. This also includes bags to keep food warm or cold.
• Passenger amenities, like snacks or drinks.
• Personal protective equipment (PPE), such as face masks or hand sanitizer.
• Training, including business or driving courses and any other education you pursue that’s relevant to your work as an Uber driver, including online courses.

Mobile phone expenses

You can also deduct expenses that are related to your mobile phone. In particular, there are two deductions you should know about:

• Percentage deduction: Because your phone is a necessity for driving with Uber, you can deduct a percentage of your data plan (yet again, this should correspond to how much of your data you use for Uber versus how much you use on your own time).
• Depreciation or immediate deduction: If you purchase a phone for business purposes, you can deduct either its full cost in the year of purchase or the cost of its depreciation over several years. The key is that you must exclusively use it for Uber (or other side hustles or jobs), otherwise it doesn’t count as a business expense and isn’t legally deductible.

Other business expenses

Since keeping good records and filing taxes are crucial to running a business, you can deduct some of the costs of doing so as well.

For instance, if you use accounting and bookkeeping software like TurboTax or QuickBooks for managing your expenses or just to file your taxes, you can deduct the cost of purchasing them (or the subscription required to use them).

Similarly, if you get tax advice for your Uber side hustle from accountants, tax preparers, or other consulting professionals, you can deduct their fees, too.

Self-employed health insurance

The IRS allows you to deduct your own health insurance premiums from your taxes, as well as those of your spouse and dependents.

However, to qualify, you cannot be eligible for an employer-subsidized health plan offered through either your employer or your spouse’s. To find out how much you’re eligible to take, follow the IRS’s guide on Form 7206 (the piece of paperwork used to claim this deduction).

Tracking your expenses throughout the year is the best way to ensure you have all the information you need to take your deductions.

As mentioned, you should maintain a mileage log (or use a tracking app that will handle that automatically). Keep any and all receipts associated with your business expenses.

Not only will this make it easier to file your taxes, it will also help you set a yearly budget and greatly reduce your potential headache in the unlikely (but far from impossible) event that the IRS audits you.

Staying organized before tax season

Here are a few tips to make preparing your tax deductions as simple as possible:

• Establish a tracking system: Create a system for tracking your deductible business expenses. Apps like Everlance and Stride Tax can be especially helpful for tracking mileage, but regardless of how you do it, it’s crucial to keep tabs on your expenses. Make sure to record your tips, too—not because they can be deducted (they can’t), but because they’ll be taxed, along with your other income.
• Separate your business finances: Keep your personal and business finances separate by setting up a bank account and/or credit card just for your business expenses. This will make it easier to tally up your deductions.
• Review your driver dashboard: You can find information about tax deductions you may qualify for on your Uber driver dashboard (in the app). It’s also where you’ll find records of fees and commissions deducted by Uber.
• Keep your tax and deduction records: Conventional advice states that you should retain your tax records for at least three years after the date of filing. It’s worth noting, however, that the IRS can audit you up to six years after filing if you’ve underreported your income by more than 25%. In case of an audit, you’ll need your mileage logs and other records to prove you reported your deductions accurately. 3

As an independent contractor—which is what you technically are as an Uber driver—filing your taxes involves different steps than if you were a typical employee. Here’s a step-by-step guide to the process:

1. Gather your documents

First, collect your:

• Income records
• Expense receipts
• Mileage log

Uber will provide you with an annual Form 1099-K that lists your income for the year, as long as you meet the reporting threshold of more than 200 rides and at least $20,000 in gross fare. If your Uber earnings don’t hit that level, you’ll need to rely on your own records, so make sure you keep track of how much you earn throughout the year.

You’ll also need records of any off-the-book tips (made in cash) or other income you’ve received. 4

2. Calculate your income

Your total earnings are the sum of your income earned from Uber, including tips and bonuses. To determine your net income before expenses, add these together, making sure to subtract Uber’s service fees and commissions (if that isn’t already baked into your figures).

3. Pick your deduction method

Next, pick between taking the standard mileage deduction and the actual car expenses deduction, as described above. Again, simply deducting your miles is by far the simpler method, but it might lead to you paying more overall.

4. Calculate your actual deduction

Calculate your vehicle-related deduction using the relevant formula below:

• Standard mileage deduction: Take the number of miles you drove for Uber and multiply it by the IRS’s allowed rate for deductions (currently 65.5 cents per mile).
• Actual car expenses deduction: Take all of your business-related vehicular expenses and tally them up.

Regardless of which method you use, the next step is to take your other eligible expenses, from your phone bill to your insurance premiums, and add those numbers together to get the total amount you’re allowed to write off.

5. Complete the necessary tax forms

Using the information you’ve gathered so far, complete your tax forms. You need to fill out at least three of these:

• Form 1040: This is your primary individual income tax return form. If you’ve paid income tax before, it’s the same form you always use.
• Schedule C: This is an attachment to Form 1040 that you’ll need to report your income as an independent contractor. You’ll use it to report your gross income and expenses.
• Schedule SE: Related to Schedule C, this is what you’ll use to file your self-employment tax, which is how you pay Social Security and Medicare taxes as an independent worker.

6. File your tax return

Submit your completed forms to the IRS by the annual tax deadline, which is usually April 15. Consider e-filing through a tax professional or tax software, which can streamline the process and reduce the chance of inaccurate reporting. 5

If you’re just starting out as an Uber driver, consider speaking with a tax professional, such as a Certified Public Accountant (CPA). Taxes can be confusing at the best of times, and they’re particularly so for gig workers; even a short chat with a CPA may tip you off to deductions you’re not taking and give you more confidence that you’re filing everything correctly.

7. Keep detailed records

As tempting as it might be to get rid of all of this paperwork the second you’re done with it, you should keep all tax-related documentation for at least three years after you file your return. This includes the records you made while tracking your deductions, which you’ll need in case of an audit.

Label your paperwork clearly, and store it in a safe place so you can access it in the future.