Do you pick up passengers for Uber or Lyft, make deliveries for Postmates or Doordash, visit clients, or otherwise use your vehicle for business purposes? If you do, read on! Here are our top 3 money saving tips for independent drivers to help you save hundreds or thousands of dollars on tax deductions.
Tip Number 3 – Educate Yourself
We’ve done multiple surveys over the last couple years asking independent workers and drivers if they know how tax and deductions work for them? The majority of responses were a resounding “No”.
What that means is pretty clear. Most independent drivers don’t know that they will owe potentially hundreds or thousands of dollars in taxes in April. Approximately 30% of their earnings might go to the government.
However, it’s quite easy to substantially reduce or eliminate what you owe with some simple education (like this blog post on filing taxes on the on-demand economy).
The point is simple, especially if you’re new to being an independent or self-employed worker: Take the time to do a little reading and learn about record keeping and filing taxes. And if you have specific questions, seek help from online forums or discussion groups too!
Tip Number 2 – Keep A Record Of Your Expenses
Here’s a brief overview of expenses you should keep a record because you may be able to deduct them: Car payments, interest on the auto loan, license, title, and registration, fuel costs, maintenance, insurance, mobile phone and charger, wireless plan, and car washes.
If your a rideshare (Uber or Lyft) driver or other independent driver, these costs can become substantial and potentially offset any potential tax owed.
Whether you’re keeping receipts or using an app, the main point is to keep a record and always think about keeping a record of these expenses. The best practice for many independent workers is to get in the habit of entering an expense when you’re filling up at the pump, in the car wash, or otherwise have just made the purchase.
Tip Number 1 – Track Your Mileage
It’s always worth re-emphasizing this because if you do one thing, this would be it: Track your business miles. The reason is that most self-employed or independent workers use the standard mileage deduction when filing taxes ($0.54 per mile in 2016).
If you use an app like SherpaShare for this, you’ll have an online record of all of your trips, including maps of where they took place to use for taxes and to defend against any potential audit in the future.
If you drive 100 miles in a day for business, that’s a $54 deduction right there! You can quickly see how just by tracking miles automatically you can end up deducting thousands of dollars from your taxable income.
Have any other tips you’d recommend to your fellow independent workers? Leave a comment! Want a free trial of SherpaShare to get unlimited mileage, expense, and earnings tracking – and more. Get your 14 day free trial.