How to deduct ride-sharing on your taxes
“Do I have to pay taxes on the money I make from Uber?”
A friend sent me this in a text after his first weekend as a driver for Uber. I’m not a lawyer or an accountant, but it’s safe to say that we all should know that pretty much all income is subject to taxes. When you drive for Uber or any other ride-sharing company, it’s important to remember you’re not an employee. You’re an independent contractor as a driver. This means you have to pay your own taxes and take care of the financial side of things.
You need to know how to figure out the way to claim ride-sharing on your taxes so that you don’t get yourself into trouble with the CRA. It also makes sense to consult a professional for further instruction if you’re confused about anything in this article.
That said, it’s possible to claim deductions for your driving. But how do you deduct ride-sharing on your taxes?
Tally up your total income
The first step when completing your taxes is to tally up the money that you generate before any expenses occurred. Find out how much money you made in total. Most ride-sharing companies send you this information so that you can complete your taxes. You can’t proceed without this.
Figure out what your expenses are
What can you exactly expense as a driver on your taxes? Does that pack of gum you purchased for passengers count as a tax write-off?
The most crucial expense is the fuel. It’s important that you track your mileage and keep your receipts from when you buy gasoline. Other car-related expenses come into play as well: maintenance and repairs, lease payments, insurance, deprecation, and vehicle registration. These are your largest expenses, as you typically need a car to be a driver.
Note that there could be some issues with the mileage that you claim. For example, you might not be able to claim the fuel when you’re just turning on the app and driving around waiting for passengers.
What are some other expenses that you can claim?
- The percentage of your cell phone that you use for ride-sharing (data plan too)
- Car charger
- Meals you buy for passengers
- Gum you bought for the ride
- Air fresheners
- Snow brush
- Car wash
It’s important to track all the expenses you incur as you’re working as a driver. You want to have easy access to your documents and receipts because taxes are complicated enough.
Work with a professional
I suggest working with a tax professional for your first round of taxes as a ride-share driver. You don’t want to get yourself into trouble, nor do you want to miss out on possible deductions. It’s true you can buy software that makes taxes easy for you. However, ride-sharing is fairly new. It might not provide all the help you need.
Good luck with work as a ride-share driver. You may drive on the weekends for extra cash, or you might end up driving full-time. All the best and drive safe – and don’t forget to consider the tax side of the equation.