Uber Driver Taxes
Oh no! Nobody likes to think about paying taxes, but it’s important to cover all aspects of your new career as an Uber driver. The short answer is that you will be considered self-employed and your taxes should be calculated for that.
Do Uber drivers pay taxes? What about quarterly estimated taxes?
Uber drivers must pay taxes as a self-employed person. In other words, Uber pays your wage, then you are responsible for your taxes. The amounts paid vary year to year and based on your circumstances, so please contact the IRS (Internal Revenue Service) if you have any questions.
Usually, you must make tax payments if you expect to owe at least $1,000 in federal tax after subtracting tax withholding and tax credits, plus, you expect those withholdings and credits to be less than the smaller of these: 100% of the tax shown on your last year’s federal tax return, or 90% of the tax shown on your current tax return.
In short, you only pay tax if you earn enough to pay $1,000, but clearly, it’s worth seeking more advice from the IRS or Uber if you have any specific questions about your situation. Problems with your tax situation could make it much harder to earn money down the line, or even constitute fraud if you are found to have not done enough to obey the rules. Always check for up-to-date changes!
Estimated taxes must be paid quarterly, when, without deductions, you are in the 25% marginal tax rate and will have a total tax rate of about 40% when you include in the 15% self-employment tax. Or, with a 40% tax rate, if you made over $4000 take home from Uber after commission, you will need to pay estimated taxes.
Again, please contact your local tax authority to confirm figures as they change often and may not apply to your personal circumstances. These figures are just a guide. Estimated taxes are paid quarterly or you will have an extra penalty at the year end.
Introduction to rideshare taxes and 1099 form
Using the system for self-employment, your income will be subject to self-employment taxes, such as medicare and social security. Legislation requires you to file for taxes no matter how much you earn with your Uber salary. You can find the form 1040SE on the IRS website for this purpose.
The 1099 form is a useful way to fill out your taxes. You can request one from your tax authority but should receive one if you earned over $20,000 in Uber fares and have taken over 200 passengers (rides). Otherwise, use your salary figures to fill out the 1040SE form mentioned above.
Do you need more help with taxes?
Understandably, you will have questions about how to handle tax properly as a self-employed driver. There is a lot to consider, from tax returns to proper receipt handling. Always keep records whenever possible (Uber will help here with the app) so that you can see exactly how much you’re spending and making as you drive.
You can find software online to help you automatically calculate tax and there are detailed guides available on rideshare related websites.
The best place to get accurate advice that applies to you is your local tax office. Search for IRS online and follow their instructions. Once you have established a routine for one tax quarter, the rest will be much easier.
Tax deductions and calculations for rideshare drivers
There are certain expenses which you can deduct from your taxes. This will help you to maximise profits and run a more efficient Uber service.
- You can deduct mobile phone fees. Many recommend having a separate phone for use with Uber, so that it’s very clear that your entire phone bill is for business use, rather than half personal and half business.
- You can deduct anything you spend on passenger comfort. Bottled water, candies, tissues and so on.
- You can deduct the mileage on your car. This is often used as an alternative to calculating the various day-to-day expense of running the vehicle, from maintenance to fuel.
Calculating your tax is a tricky affair as values and rules change year to year. The following is purely for a rough guide and you should seek advice from a tax professional for actual figures.
Your tax rate is based on your income, so it rises as you earn more. For the year 2015, your income levels and tax amounts should look like this:
Rate Income Bracket
10% $0 to $9,225
15% $9,225 to $37,450
25% $37,450 to $90,750
28% $90,750 to $189,300
33% $189,300 to $411,500
35% $411,500 to $413,200
This guide gives you a rough idea of the rate you’ll be paying once you work out how much income you’re making. Don’t forget that you also need to pay self-employment tax, which is currently 15.3%, but the employer-equivalent portion of this can be deducted.
Remember that you must declare your earnings from Uber to the IRS, so it may be wise to print out your earning summaries from your Uber app to help you keep track of them. Many drivers take their own notes too, in case of any mistakes. The IRS will examine any deductions you claim very closely, so always have evidence to back them up.