You don’t have to have been an Uber or Lyft driver for there to be special considerations to your taxes relating to use of your personal vehicle: Instacart shoppers or delivery drivers that use their own vehicle should also be aware of the additional deductions available to them. Shared Economy CPA has provided the following most common mistakes made by people who use their personal vehicle to earn in the sharing economy:
1. Taking the Standard Mileage and Gas Deduction. Should you take the standard mileage deduction, or should you deduct actual expenses? Once you pick a method you can’t change, so choose wisely or seek professional tax advice.
2. Not deducting your cell phone bill or Spotify premium bill. If using your cell phone or having a Spotify premium account were “ordinary and necessary” costs to your business, they are deductible. Make sure you calculate the percentage of the cost used for business, and document why having a cell phone and Spotify premium are ordinary and necessary business expenses.
3. Not taking the commission deduction. Some “rideshare” drivers at one point paid up to 25% of their earnings towards commission! For example, New Year’s Eve surge rate in Orlando, Florida was 8.9X, that means you can potentially leave 8.9X of commission deduction on the table. Make sure you deduct all commission charged by the platform you used.
4. Keeping poor and inadequate records of your business expenses. Make sure you check your bank records for expenses incurred that were ordinary and necessary to running your business, but forget the Hello Kitty bobble-head (you might think it was necessary, but the IRS won’t.)
We have provided these tips to you for informational purposes only. Everyone’s tax situation is different, so please contact a tax professional if you have questions specific to your personal situation. If you are planning on hiring a tax professional, take a look at the Tax & Finance services available through the Support Marketplace. Thanks again to the Shared Economy CPA for sharing their expertise with the community.
Have a specific question that wasn’t addressed here? Add your question in the forum and we’ll do our best to track down an answer for you.